Trends under the Macroscope: Recent Episodes
CPR Asset Management
Welcome to “Trends under the Macroscope”, the new Macro series from CPR AM dedicated to Megatrends! CPR AM is pleased to present its new audio meeting "Trends under the Macroscope". Discover Bastien Drut, Head of Research and Strategy, and his Macroscope on the major transformations of the economy, macro, climate and social issues most likely to affect our investment processes. CPR AM My Thematic Partner
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It is clear that humanity uses too many resources. In 2022, the ‘overshoot day’ was July 28, which means that to regenerate what humanity consumes today, we would need the equivalent of “1.75 Earths” in terms of area. As a result, the concept of circular economy, which was first pushed by environmental activists, is spreading more and more widely in society and in particular among political authorities: for example, the European Commission presented in 2022 two new packages of specific proposals, particularly with regard to packaging waste and on the generalization of the design of sustainable products.
A true reference, the World Energy Outlook of the International Energy Agency (IEA) provides an overview of global energy markets. The current context makes this edition particularly interesting, the
IEA qualifying the current crisis as the "first global energy crisis" that the world has known.
Issues related to cybersecurity become more critical in the current context. The European Commission has just unveiled its Cyber Resilience Act.
The United Nations has just published its World population prospects 2022 report, which is really a reference document and gives us the opportunity to take stock of the major demographic trends.
The United States adopted the Inflation Reduction Act this summer, a major climate and energy bill. Democrats are touting it as the law with the largest climate investments in the country's history. This law includes many distinct spending items and it is important to
analyze it in detail to appreciate the extent of progress.
The oceans play a very big role in the global economy, given that more than 90% of global trade is transported by sea. Recent works have shown that tightening of environmental regulation of cargo ships can lead to spectacular gains in terms of public health. In the years to come, additional efforts will be made to drastically reduce the sector's greenhouse gas emissions, very likely with the implementation of new technologies, such as the use of hydrogen.
It is now well established that global warming increases the probability of violent flooding episodes. A recent study focusing on 9,500 cities in 175 countries measured the local economic impact of floods and shows that adaptation measures greatly mitigate this negative impact. The subject of adaptation and resilience to climate disasters will arise more and more and should take an increasingly important place in public policies.
Everybody has the intuition that because of remote work, a certain number of people
have left the big cities to go live in smaller cities and that this has propelled housing prices out of the big cities. A recent study shows that this phenomenon may explain more than half of the increase of house prices over the past two years.
Greenhouse gases emissions continue to rise but what do we really know about the distribution of emissions? A recent study shows that a small share of the world population is responsible for the bulk of emissions but the geographical breakdown is not necessarily obvious.
Many countries or continents have made commitments to achieve net zero GHG emissions in 2050, 2060 or 2070. But what do we really know about the consequences it would have on the labor market? What will be the magnitude of the coming labor reallocation?
More than 80% of trade in goods in volume is carried out by cargo. Maritime transport is therefore central for global trade but it encountered significant difficulties over the past 2 years (port congestion, longer travel times)… and this has disrupted supply chains and exacerbated inflationary pressures. The economic consequences are much more important than one might think at first sight.
Energy prices have risen very sharply recently, and even before Russia's invasion of Ukraine. We hear more and more about greenflation, fossilflation, climateflation, etc. We try to clarify these terms and see what they correspond to in practice, in order to get an idea of the reaction of central banks.
As plastic waste invades the planet (12 million metric tons are leaking into the oceans each year), 175 countries agreed at the beginning of March 2022 to initiate a round of negotiations in order to put in place a binding agreement to limit the proliferation of
plastics and micro-plastics before the end of 2024.
It has been largely documented that the share of transactions carried out online has sharply risen during the covid crisis. Recent research has shown that this surge had largely been transitory, except for some sectors for which digitization has been boosted persistently by the pandemic.
In recent years, the acquisitions of GAFAM have regularly been in the news and got the
attention of political authorities. But they are clearly not the only ones to have been active in terms of M&A in the tech sector and the topic appears more complex than what some press articles suggest.
Robotization and automation have sharply accelerated in recent years and academic works now link this to population ageing, associated to a shrinking of the middle-aged labour force. At a time where labour shortages are in the news, robotization and automation will be central themes in the years to come.
It is increasingly clear that climate change is disrupting the economy but also inflation, which will make the central banks’ tasks even more complicated. Climate change is becoming central in the economic analysis.
Several private institutions report a double digit increase in rents in the US, which
penalizes more the poorest households and is very likely to bring inflation to even more elevated levels in the coming months. This would prompt the Fed to tighten its monetary policy.
The digitization of payments is a bold trend and it is in particular to support this digitization that central banks are working on the implementation of their Central Bank Digital Currencies (the CBDCs). Central banks are accelerating on these projects and it seems likely that there will be a digital currency war in the coming years.
The demand for certain metals will increase dramatically with the acceleration of clean technologies. But the lack of investment in the production of these metals increases the likelihood of tensions and price increases that could ... slow down the energy transition. It seems clear that certain metals like cobalt, nickel and lithium will become central in tomorrow's economy.
The prices of natural gas and coal have risen sharply in recent weeks, and have reached
record levels in some cases. Nevertheless, it remains relevant to question the "right" price of fossil fuels against a backdrop of energy transition.
Digitization is virtually everywhere. It is transforming the ways of consuming and producing, and therefore the business model of companies. But just how big is the digital economy?
Since arriving at the White House, Joe Biden has announced very ambitious climate goals. However, the success of his climate policy will depend very much on whether or not the infrastructure plans, currently being negotiated in Congress, are passed.
While the idea that accommodative monetary policies imply an increase in inequalities, a research paper presented at the Jackson Hole central bankers conference reverses the causality and tends to suggest that it is the rise in inequalities that causes the decline in equilibrium interest rates.
The European climate law has been therefore
formally adopted by the European Council on June 28, after its adoption by the
European Parliament a few days earlier. The EU objective of carbon neutrality by 2050 is now enshrined in law.
The Commission will unveil on July 14 the “Fit for 55” package detailing the
measures to be taken to reach this objective.
The US Senate has just passed a bill allowing significant investments in research and development. Its objective is to counter the emergence and the ambitions of China in the industries of the
future
Whereas global inequalities had been falling for decades, they went up because of the covid crisis
The recent increase in the number of cyberattacks implies that cybersecurity is becoming a very mandatory investment for companies and governments
It is now very likely that remote working will stick. And the economic consequences of this change of the way of working are significant
The covid crisis has raised environmental awareness, with major economies announcing very ambitious climate targets, and has exacerbated inequalities around the world, which should lead to a strong response from governments
How can the Biden administration’s plans for corporate tax reform lead to a real paradigm shift at the global level? .
According to a study just published, investments in environmentally friendly projects have a much stronger impact on the economy than non-environmentally friendly investments and this being true both for energy and land use.
Including decarbonization measures and carbon capture measures in recovery packages is not just good for the planet but also a particularly effective way to revive the economy!
It is now very well known that the Covid crisis led to forced savings. What could be the consequences for economic growth?
Focus on the United States: whether in terms of income or wealth, the subject of inequalities will very clearly be a subject that will be discussed in the coming weeks in the United States
Would it be the fight against climate change, digitization, or even inequality, how infrastructure packages are related to megatrends?
In order to fight against gender inequalities, the European Commission published a proposal for a directive on pay transparency within companies.
The scientific community has alerted public opinion for years about the destruction of biodiversity and ecosystems. But interactions between the economy and ecosystems are still relatively little known!
This Biden plan is causing a lot of buzz among economists and could cause the US economy to overheat in the second part of the year 2021.
How the health and economic Covid crisis can have an impact on long term demographic trends and particularly on population growth?
With Bastien Drut, Chief Thematic Macro Strategist.
Until recently, climate change was a subject very little covered in speeches by ECB board members.
Now that the ECB officially considers that we must fight climate change, the question is: How?
Like the economy, money is becoming digital in several countries. Will developed countries abandon cash payments and become "cashless" societies”?
CPR AM, My Thematic Partner