Merryn Somerset Webb wrote a fascinating opinion piece for Bloomberg on December 8th that outlines two fundamentally different views of the world. One posits that we will quickly return to the prevailing model of the past twenty years in which the economy and markets are dominated by technology and intangibles such as patents, data, and brand value. The other view suggests reversion to an “old normal” that focuses on secure energy and natural resources, improving infrastructure, and construction of domestic manufacturing facilities. In other words, “hard assets” will come back into vogue and may even dominate intangibles.
The rationale for the second view is that many of the trends that have dominated the world in recent years are reversing. Specifically, globalization is in retreat, supply chains are insecure and disrupted, energy is now relatively expensive, inflation has accelerated, labor is scarce and more expensive, and capital is more expensive and less available.
I personally think it unlikely that there will be an extreme shift to the “old” economy but do believe that international tensions will motivate the U.S. and many other countries to pursue a revival of critical domestic manufacturing capability.