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BlackRock’s Larry Fink, who oversees $10 trillion, says Russia-Ukraine war is ending globalization. The CEO and chairman of the world’s biggest asset manager published his 2022 letter to shareholders last week.
He notes that in the early 1990s, the world emerged from the Cold War. The world benefited from a global peace dividend and the expansion of globalization. These were powerful trends that accelerated international trade, expanded global capital markets, increased economic growth, and helped to dramatically reduce poverty in nations around the world.
“The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades,” Fink said. "And while dependence on Russian energy is in the spotlight, companies and governments will also be looking more broadly at their dependencies on other nations. This may lead companies to onshore or nearshore more of their operations, resulting in a faster pull back from some countries.
"This decoupling will inevitably create challenges for companies, including higher costs and margin pressures. While companies’ and consumers’ balance sheets are strong today, giving them more of a cushion to weather these difficulties, a large-scale reorientation of supply chains will inherently be inflationary.
"Even before the war’s outbreak, the economic effects of the pandemic – including the shift in consumer demand from services to household goods, labor shortages, and supply chain bottlenecks – brought inflation in the US to its highest level [of inflation] in forty years."
At PWM, we believe inflation is a long-term trend. Supply chain disruption is painfully clear from COVID, but less globalization could be the long-term fuel.
Larry Fink's 2022 Shareholder Letter
by Larry Fink
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