G7: Economy, Equality, Green

Macro Perspectives: Tue 15 Jun 2021

The G7 leaders wrapped up their meeting on Sunday. What can we take away & learn from the G7 communique that could impact markets?

We learned that the G7 leaders are all-in on the climate and equality movement. With the global economy coming out of one of the worst crises in history, the communique mentioned; the economy 17 times, equality 22 times, and either climate or “green” 51 times.

As a thought experiment, here’s how the Electric Vehicle universe has performed over the last year… we can expect significant tail wind behind these trends.

Additionally, it had just four carefully positioned unprovocative mentions of China.

What does it all mean for markets? Following on from my notes yesterday, if there was any doubt that there is coordination and agreement among global leaders on the social and environmental agenda, there is no doubt now.

So, while the global leaders in each of these major developed market countries have indeed vowed to continue supporting the economy, it will be following the gameplan of “future growth,” not crisis response (in their words).

What does that tell us? It tells us that they will allow some economic pain (a continuation of, if not newly established pain), in the name of future growth. We can get a glimpse of what that looks like through the treatment of the fossil fuels industry. Jobs have been lost and prices have soared, all in the name of future growth (i.e. a complete transformation of global energy).

With this in mind, let’s consider what the Fed has been telling us about inflation. It’s “transitory,” they say. They may be right, if policy makers are planning to tear down, in order to “build back better.”