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A Single Wish for 2017

Wednesday, December 21, 2016

Twelve months ago I published a holiday wish list of five things I hoped would prevail in 2016. That list included more equitable distribution of income, dollar stability, greater business investment, increased infrastructure spending and a dose of common sense in politics.

Sadly, few of those wishes came true this year. Income inequality persists, corporate spending remains hesitant and infrastructure continues to crumble. As for common sense in politics, what can I say? But at least dollar strength did not derail the global economy or markets in 2016.

Of course, wishes are not forecasts, merely desires. Nevertheless, upon reflection I thought I might have overdone it. Maybe less is more? So this year my wish list is pared to one:

Greater empathy.

Our world faces enormous challenges, from improving equality of opportunity, to addressing human conflict to tackling threats to the ecosystem. But as this year’s political events in the UK, the US or Italy demonstrate, the divisions that separate us have widened significantly. Public discord is at its greatest since the 1960s, perhaps even the 1930s.

Division makes it difficult to believe that we can address our challenges. Yet the differences separating us stem largely from an inability to look beyond our compartmentalised worlds and see things from others’ perspectives.

So here are a few suggestions from a trained economist and investor as to how we could engage more empathetically:

In short, if the world is to address sources of division constructively before they overwhelm us destructively we must all open our minds, strive to eliminate pre-conceived notions and clichés and re-focus our discussion on evidence and logic. We must also recognise that many of our challenges cannot be addressed by self-interest alone. Public goods, such as police or fire protection or national security, but also the preservation of the global ecosystem, can only be provided by mutual consent and cooperation.

As I write, optimism prevails in financial markets. Equity indices are making fresh highs and bond yields are rising on expectations of better growth. Prevailing investor optimism is not misguided. Tax cuts, increased government spending and deregulation advocated by the incoming Trump Administration are likely to bolster US and global growth. Economies in North America, the UK, northern Europe, Japan and China have proven resilient. Peripheral Europe is growing again. Recessions in Russia and Brazil are drawing to a close. Commodity prices have stabilised, lending support to many emerging economies.

But more capitalism alone will not suffice...lasting prosperity also requires social cohesion and opportunity for all, and it must be compatible with environmental sustainability.

So while markets surge on near-term hope, as a long-term investor I’m keen to see whether 2017 can deliver common understanding that will allow us to build foundations for enduring optimism. And understanding begins with empathy, my sole wish for the coming year.

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