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Client Update - 19th January 2024

For 51 weeks of the year, the unassuming ski resort of Davos in Switzerland is a haven for winter sports and alpine holidays. For one week in January, it focusses the world’s attention by hosting the annual World Economic Forum (WEF). Over the last few days some 2,500 heads of state, senior politicians, business leaders and CEOs have given their views on the world economy and the collective challenges we face. It is also an opportunity to network, close business deals and then attend lavish parties, but none of this gets televised of course. Attendance by Prime Ministers and Presidents was a little thin on the ground compared to previous years. In a year of so many elections, hob knobbing with the ultra-rich and famous does not play well with the “I’m one of the people” impression that politicians will be desperate to portray.

The theme of this year’s WEF was "Rebuilding Trust”, with speakers presenting a more optimistic economic tone, indicating the high inflation that had been of such concern 12 months ago is now under control. Leaders highlighted that major economies are poised for a controlled economic slowdown thanks to recent interest rate hikes. The atmosphere was one of reserved caution rather than outright celebration. This is interesting and it reflects our current views on the global economy.

The usual focus on climate change and carbon neutral transition that has been central to the agenda in previous years was also notably absent. Perhaps it has not been lost on the WEF organisers that the event had over 1,000 private jets travelling to airports surrounding Davos. A quick calculation showed that a total of 9,700 tons of CO2 was produced as a result of the forum, the equivalent to the emissions from 350,000 cars in a week.

Staying on the air travel theme, the Boeing management were keen to start “Rebuilding Trust” themselves, but the bad news just kept on coming for them. No doubt you would have seen the news of the Alaska Airlines Boeing 737max which was forced to make an emergency landing when a door plug came off shortly after take-off. After his Davos visit, the US Secretary of State Antony Blinken got stuck in Zurich due to an oxygen leak in his private Boeing 737. This resulted in another plane being sent over to pick him up, adding a bit more to the CO2 tally from the forum.

It was clear that the conflicts in Ukraine, Gaza and the tensions in the Red Sea were firmly on leaders’ minds. The need for global cooperation was a recurring theme, beginning with the opening remarks by the WEF president, Klaus Schwab. European Commission President Ursula von der Leyen warned against the West slackening their support for Ukraine as President Zelensky flew into Davos to talk to leaders and sure up support, at no small personal risk to himself.

The Premier of China, Li Qiang, reflected on China's current initiatives and shed some light on the advancements made in building future-ready energy systems, notably in photovoltaic capacity (the amount of electricity output from a solar energy system) and transportation. He was keen to stress that the Chinese economy is open for business, highlighting its potential for foreign investment. Considering the sharp drops in Chinese and Hong Kong stock markets this year, China took the opportunity to get a positive message out to key global decision makers.

The forum also saw Microsoft CEO Satya Nadella share his optimistic outlook on the future of AI, emphasising the need for unified global standards in the industry. In a discussion with Klaus Schwab, Nadella outlined the direction he envisions for AI, stressing the importance of establishing global safety measures. He went on to acknowledge the dual nature of AI, its ability to significantly boost productivity and improve areas like job quality, education, and healthcare, alongside concerns about job displacement, misinformation, and broader existential risks. Perhaps he read last week’s update letter and has been reflecting on the lessons from Mr Bates vs the Post Office?

It is clear that there was no one big theme at the WEF. Discussions and speeches covered a range of topics, Central Bank rate cuts expectations, ongoing geopolitical tensions, challenges in energy security, growth dynamics in China and the evolving landscape of AI. The World Economic Forum showed that the attendees believe the global economic outlook remains subdued for now and there is much uncertainty. This is very much in line with our thinking, and we have been constructing portfolios for exactly this sort of environment, minus the use of private jets of course. Do have a good weekend.

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