A business year of bubbles and tensions with only one certainty ... the rich got richer

International business appeared almost impervious to the huge political tensions in Korea and the Gulf, as global shares soared and the rich got richer, writes Kyran Fitzgerald.

A business year of bubbles and tensions with only one certainty ... the rich got richer

Glancing at our turbulent world at this time of year, writers and analysts like to sniff out trends and hunt for perspectives and try to make sense of the past 12 months while offering a preview of sorts of the year ahead. This, then, is one person’s Christmas fare, or burt offering.

A new president eyeballed a young princeling dictator who kept lobbing rockets into the sky as the focus of concern switched to East Asia.

While the UK was beset by terrorism, Islamic State lost control of its Syrian and Iraqi strongholds.

Further south, there was a shakeup in Saudi Arabia as a new crown prince took on established interests, incarcerating many leading business figures on foot of corruption allegations. The rivalry with Iran heated up and the Saudis and their allies also took on the Gulf state of Qatar.

But international business appeared almost impervious in the face of such events. It was another good year for shares.

The pace of change, both climatic and technological, appeared to quicken. The US and the Caribbean, in particular, were more prone than ever to hurricanes, floods, and fires, while nearby Mexico City was hit by an earthquake. A long drought ended in California, but fires returned with a vengeance, consuming much of the Napa Valley and some suburbs in Los Angeles.

The rich got richer while ordinary consumers ordered up plenty of treats, very many of them online. The global economy grew at an estimated 3.7%, with a noticeable pick up in activity across much of the EU.

President Donald Trump got down to business following an unusually downbeat inauguration address.

He ended the year on a high as his tax "reform" plan passed through Congress, providing a huge boost to companies and the wealthy, along with the prospect of an additional burden to the existing US national debt.

Commentators were appalled, but investors were seduced by the promise of tax cuts. The so-called Trump trade propelled share values. The Roaring Twenties all over again? We all know where that ended up, in October 1929.

A whole series of bubbles swelled in size. A painting by Leonardo da Vinci sold for $450m (€379m) in November, the highest sum ever paid for a painting. The greatest bubble of all was the digital currency Bitcoin. Cheerleaders for the currency included dog lover Paris Hilton and the boxer Floyd Mayweather. Economists such as Robert Shiller of Yale were much less enthusiastic. French Finance Minister Bruno Le Maire warned of systemic risks.

Across the world, already cash-rich corporations benefited from tax cuts. The US rate is dropping from 35% to 21% while new French President Emmanuel Macron plans a series of cuts in business taxes, part of a wider shake-up of his country’s economy. Forbes magazine published details on the billionaires whose net worth rose most.

The ten biggest billionaire winners added $204bn to their collective fortunes. Top of the list was Amazon boss Jeff Bezos – his net worth jumped by $34bn to almost $99bn. In second place was Chinese property magnate Hui Ka Yan whose net worth soared by over $27bn to $36.5bn.

And the bronze medal was taken by Bernard Arnault, whose wealth surged $23.5bn to just over $40bn, on Mr Arnault’s stakes in Christian Dior and luxury goods firm LVMH.

Facebook’s founder Mark Zuckerberg had to be content with an additional $23.6bn this Christmas. His wealth is estimated at $72bn. The year brought its share of challenges, though. Facebook and other social media giants faced growing criticism over the failure to control their content of fake news and filthy opinions.

Other big winners include Ma Huateng, owner of Chinese messaging giant WeChat; Mukesh Ambani, the Indian petrochemicals and telecoms entrepreneur; Mexico’s Carlos Slim; Yang Huiyen, the richest woman in Asia; Oracle founder Larry Ellison; and Francois Pinault, owner of art house Christie’s.

While global banks may be stumbling, the insurance industry is facing challenging times. Underwriting losses more than doubled to $5bn in the first half of the year before the arrival of hurricanes Harvey, Irma and Maria. Sadly, President Trump announced his country’s withdrawal from compliance with the Paris climate accords.

Meanwhile, the life sciences are pushing ahead. Devices that monitor vital body signs are increasingly used by tech-savvy, and health-conscious customers. A Deloitte report suggests that insurers should invest in tech and health firms to lure young consumers.

Longer term, insurers face a challenge with the roll-out of self-driving and automated vehicles designed to drastically cut road accidents. The increased use of technology in daily life combined with breakthroughs that lead to the price of clean energy are among the key ongoing developments in business. Governments have yet to get to grip with the challenge of retraining often ageing workforces so that they can best cope with the transition.

A major debate is underway over what many economists consider to be one of the paradoxes of the global economy: The slowing in rates of productivity growth. Expect this debate to become more heated in the coming years.

So, can the good times continue to roll at least for those fortunate enough to have a stake in society? As the Economist reported, a poll of 229 asset managers by Absolute Strategy Research found that 61% expected equities to be higher by next Christmas; 75% predicted that shares would outperform bonds.

They saw a 27% chance of a global recession, but curiously, while optimism about the stock markets has increased since last December, the polled group were less upbeat than a year ago about the state of the business cycle.

Among the clouds on their horizon: A growth slowdown in China and faster than expected interest rate rises in the US. Now, that could be one to watch.

The President Trump tax cuts could soon mean a huge increase in the US debt. It is a lot harder to embark on spending cuts, particularly in an election year.

The newly nominated  Federal Reserve chair Jerome Powell is not up for re-election.

He may wish to squeeze inflation before it can get hold and he may be worried about the US’s creditworthiness.

Watch this space.

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