{"id":39526,"date":"2023-07-23T19:15:44","date_gmt":"2023-07-23T23:15:44","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/pgims-david-hunt-globalization-isnt-dead\/"},"modified":"2023-07-23T19:15:46","modified_gmt":"2023-07-23T23:15:46","slug":"pgims-david-hunt-globalization-isnt-dead","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=39526","title":{"rendered":"PGIM’s David Hunt: Globalization Isn’t Dead."},"content":{"rendered":"

While nationalistic zealots around the world\u2014from China to Russia to Turkey to, yes, the U.S.\u2014are setting up trade barriers and decrying globalism, it appears that intrepid business people are paying them no nevermind.\u00a0<\/p>\n

Despite the best efforts by the Our Country First crowd, globe trade is up, up, and away for the most part. This, even with Vladimir Putin\u2019s invasion of Ukraine (and his latest apparent move to block grain shipments from that country), and with the world\u2014especially China\u2014still emerging from Covid doldrums.<\/p>\n

\n

It\u2019s a point not lost on David Hunt, CEO of PGIM, the asset management arm of insurance giant
\n Prudential Financial,<\/span>
\n which runs some $1.27 trillion. In an interview with Hunt, I mention that deglobalization seems to be a significant political trend and asked him how seriously he considered it to be.<\/p>\n

\u201cWe don\u2019t believe that deglobalization either is happening or will happen,\u201d Hunt says. \u201cActually, global trade flows are very, very strong today. We haven\u2019t really seen a drop in it. And we don\u2019t expect to see one.\u201d<\/p>\n

The numbers back Hunt up. According to the United Nations Conference on Trade and Development, or Unctad, global trade hit a record $32 trillion in 2022, up 12.3% from the previous year, which was up 25% from 2020 , which was up 13% from pre-Covid 2019.\u00a0<\/p>\n

See a trend here?<\/p>\n

So yes, global trade is humming along\u2014though beneath the surface, there are a number of important trends unfolding. First, it\u2019s true that global trade was weak in the fourth quarter of 2022 and in the first quarter of this year, and that it continues to be a bit tepid. However, that\u2019s more a reflection of fears of a global economic slowdown, which may be abating, and not any concerted\u2014or disparate, for that matter\u2014effort by antiglobalists.\u00a0<\/p>\n

It\u2019s also worth noting that in some countries, electorates have voted out leaders with nationalist leanings. In Brazil, Luiz In\u00e1cio Lula da Silva is in as president, and Jair Bolsonaro is out. And of course in the U.S., Joe Biden is in, and Donald Trump is out\u2014though to be sure, while Biden is certainly more of a globalist than Trump, he has maintained and even hardened, particularly in tech, his predecessor\u2019s trade barriers against China. And powerful GOP antiglobalist forces hold sway in Congress.<\/p>\n

Speaking of China, though, that country\u2019s standing in the global trade picture is certainly evolving, which Hunt notes.\u00a0<\/p>\n

\u201cWhat we are seeing with the wave of globalization we have now, and will have in the future, is very different from what we had over the past 20 years, where it was very much a China story,\u201d Hunt says. \u201cNow, what we\u2019re seeing is that it\u2019s a regional story.\u201d Here again, numbers bear Hunt out. US\/China trade in goods (imports plus exports) totaled about $220 billion through May of this year, down from last year, and down from 2019 levels, as well\u2014and actually about on par with activity a decade ago. Notably, the decline has been in U.S. imports from China. Our exports to China for the first five months of the year\u2014at $62 billion\u2014powered by recent growth in grain and oilseed shipments, are at a record.<\/p>\n

What those numbers are saying is that the meteoric growth of Chinese exports to the U.S. may be over\u2014at least for the time being. And yes, much of that is the result of \u201cconscious uncoupling\u201d (to borrow from Gwyneth Paltrow) or \u201cde-risking\u201d\u2014pick your term of art. Specifically, tariffs and trade barriers, companies reconfiguring their supply chains, and security concerns over Chinese technology and telecom hardware have all contributed to the decline in our imports from China.\u00a0<\/p>\n

No doubt this has crimped the Chinese economy, which may be why we are seeing a renewed appetite by the Chinese for engagement with senior U.S. officials, including Secretary of State Antony Blinken, Treasury Secretary Janet Yellen, U.S. climate envoy John Kerry\u2014and unofficial but significant visits by Bill Gates and 100-year-old former Secretary of State Henry Kissinger. It\u2019s mostly just all talk for now, but China may be realizing that you can\u2019t decouple your way to growth.<\/p>\n

Beyond China, though, global trade is taking on myriad new dimensions, Hunt says. \u201cIt\u2019s much more fragmented across countries,\u201d he notes. \u201cWhether it\u2019s what\u2019s happening in Indonesia, Vietnam, or Mexico, you\u2019re seeing a lot more regionalization of flows, and much less of a dependency simply on one country. And that fragmentation actually will make this range of globalization more stable and less reliant on any particular country going forward.\u201d<\/p>\n

Ian Bremmer, president and founder of Eurasia Group, and a student of global political and economic trends for decades, concurs in an email. \u201cI\u2019d say the difference now is you no longer have the U.S. or anybody else driving the expansion of globalization,\u201d Bremmer says.<\/p>\n

\u201cThis was a 50-year explosion; you don\u2019t suddenly turn it off,\u201d Bremmer continues. \u201cThere are real decouplings going on that are dampening global trade, but they\u2019re either constrained (Russia kicked out of the Group of Seven, U.S. and China in strategic sectors) or incremental (the move to onshoring and near-shoring). And that\u2019s set against existing investments and continued efficiency gains. So, while I can see global trade plateauing, I don\u2019t think we are in an age of deglobalization. At least not yet.\u201d<\/p>\n

Unctad data confirm Bremmers take, noting a \u201creorientation of bilateral trade flows to prioritize countries that share similar political values,\u201d that is, so-called friend-shoring. Examples here are increases in trade between the U.S. and Mexico, the European Union, Canada, and Taiwan (all up about 1%), while Ukraine to Europe has soared 20.5% in 2023\u2019s first quarter versus the first quarter of 2022. On the other hand, on the downside: China to the U.S. and Russia to Europe declined 0.9% and 5.6% respectively.<\/p>\n

Hunt\u2019s company, PGIM\u2014pronounced (pea<\/em>-gym)\u2014is itself a product of globalization. \u201cThe business originally grew out of Prudential Financial,\u201d says Hunt. \u201cAbout 30 years ago, [the investment business] was taken out of the insurance company and set up as a separate operation with the mission to build a big third-party business [and to take money from investors outside the company]. Today, most of our fees come from third-party investors.\u201d\u00a0<\/p>\n

The business took the name PGIM in 2016, Hunt notes. \u201cAnd it grew out of our efforts to truly globalize the business,\u201d he adds. \u201cIn many parts of the world, we can\u2019t use the word \u2018Prudential\u2019 because it belongs to Prudential PLC [an unrelated United Kingdom insurer], so PGIM was a name we could use right around the globe to designate the global investment manager.\u201d<\/p>\n

PGIM has no plans to pull in its global horns. \u201cWe remain deeply committed to our global business model and we continue to invest in the international markets in which we operate,\u201d Hunt tells me. In fact, PGIM\u2019s overseas headcount is up 11% from last year and up 100% from 2018. Today some 31% of its sales and investment professionals are based outside the US.<\/p>\n

James Pethokoukis, a senior fellow at American Enterprise Institute, called the antiglobalists\u2019 bluff over a year ago in a piece he wrote titled, \u201cGlobalization Is Dead. Long Live Globalization\u201c\u2014and he hasn\u2019t changed his tune.\u00a0\u201cDespite all the talk about deglobalization, global trade as a share of gross domestic product isn\u2019t far off from its peak at the start of the global financial crisis in 2008,\u201d Pethokoukis tells me. \u201cEven the most obvious crisis point, the U.S. versus China, may not be quite as bad or irreparable as many think. For example, the Biden administration seems to be retreating from its most ambitious restriction on high-tech investments in China. Meanwhile, the rest of the world continues to integrate, such as Britain officially joining an Asia-Pacific trade group. And wait until countries with the worst demographics really start scrambling to attract immigrant workers. Globalization abides.\u201dSounds like the Dude (from The Big Lebowski<\/em>) would approve.\u00a0<\/p>\n

So, let the politicians bray. They haven\u2019t killed globalism by any means. At least not yet.<\/p>\n

Corrections & amplifications<\/strong>: Global trade hit a record $32 trillion in 2022, according to Unctad. A previous version of this article incorrectly said $32 billion.\u00a0<\/em><\/p>\n

Write to Andy Serwer at andy.serwer@barrons.com<\/p>\n<\/p><\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

While nationalistic zealots around the world\u2014from China to Russia to Turkey to, yes, the U.S.\u2014are setting up trade barriers and decrying globalism, it appears that intrepid business people are paying them no nevermind.\u00a0 Despite the best efforts by the Our Country First crowd, globe trade is up, up, and away for the most part. 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