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Welcome to Merrin Talks Money, the podcast in which the people who know the markets explain the markets.

I'm Merin sums at Web.

This week I'm speaking with Neil Shearing, Group chief economist at Capital Economics and author of The Fractured Age, How the Return of Geopolitics will Splinter the Global economy.

Neil's book argues that the era of hyperglobalization, marked by relatively free movement goods, capital and ideas and people as well from the nineteen nineties through the two thousands is over.

Now we are entering something he refers to as a fractured age by geopolitics, national security, and strategic rivalries increasingly shape global economic outcomes.

So we're going to unpack that argument, and we're going to talk about why this book is particularly timely in our conversation, and we'll also get Neil to explain to us how as searching this book has help him to understand the global economic picture at the moment, and how that can help you with your portfolio.

I hope you are going to tell us that, Neil.

By the way, Neil, Welcome to Merrin Talks Money.

Thanks for having me great to be here.

Thank you.

Now listen, I tell you what I think we should start off, just by setting the scene and talking a little bit more, not a great length, because I think most people are relatively familiar with this discussion.

But this era of hyperglobalization, where did it come from?

How long did it last?

There's various points which you could date the start of the kind of globalization period.

I think, by the way, it's nothing new.

You've had waves of globalization in the past, the late nineteenth century.

You could argue that there was a period of integration after the Second World War.

But in the book, I date the most recent wave of globalization as having started at the fall of the Burning Wall, so nineteen eighty nine.

And the idea behind it that this wave of globalization was that not only would economic integration bring prosperity to all economies, but it would also be a means of spreading common values and therefore peace as well.

The idea being that if you bought Russia, if you bought China, if you bought the economies of Latin America into the global economy, into the global fold, they would probably become a bit more Western.

But also there would be economic gains for the West as well.

Of course we've had a low inflation as partly as a result of globalization and gains from trade.

And there's lots of quotes that have in the book from Clinton and Barack Obama and Kofe and on the kind of virtues of globalization.

So nineteen eighty nine is where I date the start of this period of globalization.

It starts to fragment, I think, actually not with Trump in twenty sixteen, but actually I go back a bit before that in the book and say it's partly the global financial crisis, where I think some of the vulnerabilities that were a function of this globalized world were starting to be exposed.

But then really in twenty twelve when she became leader of China and really set China about a very different course of development, challenge in US A, Germany abroad, and reasserting the primacy of the party at home.

Yeah, and that's where we got that Made in China twenty twenty five project, right, which was a bit of a turning point.

And so up until then, there'd been this general belief that if you make the economy more global and everyone becomes a bit of a capitalist capitalism automatically leads somehow to democracy and to the shared values that the West thought everyone began to join in.

And it became increasingly clear into the twenty tens that that wasn't the case, and also increasingly clear that there were quite a lot of downsides to globalization that we had sort of refused to discuss in the run up to it exactly.

And I think there's a sense in which globalization also became a convenient scapegoat for a lot of the problems that the West was facing.

Globalization is not the only reason, indeed, it's not even the most important reason why there's been the loss of manufacturing jobs in the US and in the UK, for example.

In my view, there is mainly that's mainly about technological change.

But it became a convenient scapegoat for some of the particularly kind of right wing populist Trump and so on and so forth.

It became easy to kind of bash globalization.

But there were genuine kind of costs to globalization too that they were also not part of the discourse.

In the two thousands, I came came up through the Treasury in the kind of late nineties early two thousands and then it was really about kind of integration, is a kind of one way back.

Everyone would be better off as a result of global integration, and clearly that has not been the case.

Yeah, it's interesting.

One of the things that you noted that in the beginning of your book is to fall off in global tariff levels.

In nineteen ninety four, you have global tariffs aid about eight point six percent, then coming down five percent in two thousand and then down to three percent in two thousand and six.

So you can kind of track the whole thing by tariff rays, which of course have now turned back up again.

Exactly turned back up for the US, but not necessarily turn back up for other countries as well.

So we've got to some pushback on the trade front, particularly from the US, but not from other countries.

And of course, the big sea change in the two thousands was Chinese entry to the WTO, and that was really the moment kind of heralded to China's and particularly the integration of Chinese producers into the global economy.

And since then, of course China's share of global exports, it has only got a one direction.

Despite pushback from the US through Trump's first administration, then Biden, and now today with extremely high levels of tarists, china share of global exports has continued to go in one direction, which is up.

Yeah, And would you look back on that and say that it was a mistake to let China into the WTO or a mistake to let them in on the terms that they came in.

What I mean that does seem to be that one of the flash points.

Well, Hindsight's a wonderful thing, isn't it.

And I think that with the benefit of hindsight we can see that really China, but particularly under she I think I think twenty twelve was the moment where things changed, because that was the moment I think where China signaled really that it was not going to use openness to trade and open us to technology to really integrate within the within the global economy, but just kind of harnessed those as means to really challenge US agemony.

So it was kind of in the club and it wasn't necessarily going to play by the rules.

So yeah, I think clearly with hindsight you can say that the mistakes were made, but I think they were made with the best of intentions.

In the early two thousands.

Okay, so here we are in a much more adversarial position and a lot of chat about how globalization is over and we're turning to a much more nationalistic era.

But one of the things you point out that there is no sign in the data and the trade data that globalization is retruating at all.

It is pretty much as it was, so that bit isn't true exactly.

The genesis of the book really was in some thinking that we started a capsule economics probably five or six years ago in the first Trump administration, where there's lots of headlines about the US imposing tariffs on the rest of the world, in China in particular, other countries pushing back, countries turning inwards.

We obviously had the Brexit vote in twenty sixteen here in the UK in a sense that the country returning in would they were pushing back against globalization.

Lots of kind of images of the nineteen thirties being in vote, and this idea that the world was deglobalizing.

The rhetoric was everywhere, but we saw no evidence of this in the data.

To like all good ideas, really, it started by challenging the consensus.

So we asked ourselves, well, what has changed, because clearly something was changing, And when we started to unpack what was going on, came clear to me that the key change shift in the global economy over the past ten years has been the emergency of China as a strategic rival to the US rather than a strategic partners as Clinton and others had thought it might be.

And this deepening superpower rivalry between the US and China, and that has cut through the actions of the first Trump administration, but then also the Biden administration, which of course kept Trump's tariffs from the first administration in place, even expanded them and augmented them with technology controls.

And now, of course we have Trump's second of tariffs.

And it's not just one ways traffic, right, It's not just the US imposing tariffs on China.

China is pushing back against the US too.

So just this year, we've had controls on outflows of FDI from China to the US, for example, And in the last couple of weeks we've had the US finally saying to Nvidia, you can sell some of your advanced chips to China, not the most advanced ones, but some of the some of the kind of second tier, if you like, and China's saying, well, thanks very much, but we're not interested.

We want we want domestic producers to use domestically produced chips because we want to develop some self sufficiency and we see some vulnerabilities in becoming too a meshed in the US technological ecosystem.

I think it's a danger that we view this through a Western lens, that it's all Trump and it's all US pushback.

But this is happening in China too.

Okay, So we now have this situation where you've effectively got China and the US as the two economic greats in the world.

They're not cooperating anymore in the way that we had hoped that they might separate.

So what you call fracturing is the next bit where the world effectively divides into two blocks, one circling around the US and one circling around China.

Exactly.

So the idea, the thesis, if you like, is not that the world turns inwards, not every country kind of rex trade barriers and indeed for that amount of capital controls, because capital flows are still extremely high by the historic standards too, as our people flows.

But rather that the world breaks into two blocks, one that is broadly aligned with the US is centered on the US, and another that is centered upon China.

So these blocks centered upon the two great economic superpowers within the world.

Now, the key point I make in the book is the exact shape of this fracturing, the form it takes, is yet to be decided, and the economic consequences will be determined by both how deep the split between these two blocks becomes.

Can we confine it two areas that are of strategic importance and let the rest of kind of global trade kind of get on with it and leave it relatively untouched, or is it a much broader split?

And the second factor that's really going to determine the economic consequences of this fracturing will be how other countries align.

Alliances are going to really matter in this fractured world.

And of course there's a big danger to the US is that through Trumb's actions, they're pushing away allies rather than pulling them closer towards the US.

Yeah, well, let's talk about the alliances first and then talk about the depth.

It's quite interesting to think about who might go where.

Obviously, there are sort of natural partners for each country, and then there are floating areas where you can't be absolutely sure which way they're going to jump.

So who do you think would definitely be on the US side and definitely on the Chinese side, and who's floating.

If you look at this kind of shape at the fractured world at the start of this year, about half of the world in my estimation, kind of fell into the China Block and about half of the world fell into the US Block by population.

And this is based on some work that we've done at Caps of Economics that looks at trade flows, capital flows, defenses, security alliances.

How different countries vote at the UN, for example, is a kind of sense of political alliance alliance.

So about half of the world's population in the China Block, half the world's population in the US Bloc.

But if you look by GDP, about two thirds of the world the world's GDP is in the US Bloc and only about twenty five percent of the world's GDP is in the China Bloc.

And the remainder is kind of in these a handful of underligned countries.

So who's in the US Bloc at the start of this year, Well, Europe, Japan, Korea, Taiwan, Mexico, Canada, Australia.

India leans towards the US in our estimation.

Indeed, it is potentially one of the biggest beneficiaries of fracturing because to the extent that manufacturing has moved out of China moves to another low cost producer like India, Vietnam, the Philippines and so on and so forth.

So is India is Indian given?

Well, no, exactly, So this is this is a key point, right.

So that's the US block and then the China Block.

You have the usual such Russia and Venezuela are are in North Korea, a lot of Sub Saharan Africa is in the China Block.

And then there's a handful of countries like Brazil, Indonesia that I think kind of float between the two blocks and try to remain unligned.

And then India is the key question here now.

I think if you'd wind the clock back three months and said, well, what does Trump's return to the White House mean for US India relations, I think we would have all said, well, it strengthens them, right, two strong men, they're kind of nationalistic in their views.

They get on personally, so we're told, and there's a whole load of economic reasons why India will seek stronger ties with the US.

They're deeply skeptical of Chinese technology, they're concerned about Chinese competition, they have a long running board of dispute with China that's as yet unresolved.

And of course India potentially is, as just saying, stands to be one of the economic beneficiaries of this fracturing.

And yet we have a situation where because of this, supposedly because of India's purchases of Russian oil, these enormous tariffs slapped on India by Trump, and the siring of the relationship between Dery and Washington.

Now, it remains to be seen exactly how that plays out, but I think a reasonable base case might be that India obviously has a tradition of being underligned through the Cold War.

Maybe it doesn't lean towards the US, maybe it starts to try to to the extent that is possible, breach these two blocks is equally possible, I think, such as the kind of volatile and unpredictable nature of US foreign policy at the moment, it's possible that we get it some kind of deal and aprosh mode between Derli and Washington over the next six months, and all of this kind of quickly becomes water under the bridge.

Okay, so there's a there's a bit of weight and sea to come on.

Who goes where.

But let's then talk about the depth of the fracturing, because the hope, I think, or your hope looking at this, would be that an awful lot of the global economy continues as was.

Everything from you know, clothing to telephone laptops to fridges, etc.

Continues to be traded in exactly the same way, and it's only relatively small percent of the global economy things that the American block on the Chinese block would consider to be of strategic importance that would be affected.

So well, that's a big deal.

It wouldn't make that much difference to global trade exactly.

That's the kind of central thesis that I set out in the book, and it's consistent with the idea that ran through the Biden administration of there being a kind of small yard, high fence approach to trade.

So otherwis the small yard being the areas of goods and services, and frankly capital flows too that you decide that are so strategically important that you want to hem off from China, and you build a high fence around that so small yard high fence, And in the book, I essentially sketch out three areas where I think will comprise that yard, if you like, is anything that compromises supply chain security, anything that compromises national security, and anything that compromises global technological leadership.

So semiconductors, battery technology, need pharmaceuticals, biotech, jaw use goods, smartphones, the jewel use goods, the jewel use goods being goods that have applications in both civilian and military life, so turbine engines, drones being an obvious one.

These are the areas where I think we can be reasonably sure that over the next decade there's going to be a pulling a part of supply chains and de risk in the supply chains in the Western in China are pushed to self sufficiency in those areas by China, and are de risking in the West from china reorientation of supply chains.

The question becomes, really, I think, is can we limit it to those just those areas, And clearly Trump's tariffs indiscriminate across the board.

That raises the specter of a much wider split.

And this really matters.

So the estimates I have in the book are that if we can contain it's fracturing two areas of strategic importance, so there's three areas that I just set out, then there will be an economic cost.

There will be about one percent of global GDP if that happens over a relatively long period of time.

It happens in the gradual and managed way, it's about one percent of global GDP, So it's not nothing, but it's manageable.

But does it not become more than that over time?

If it affects productivity growth and affects technological exchange and advancement, et cetera.

If you have the two major blocks operating separately on high tech areas, there's got to be a long term effect that goes beyond the initials.

Always that's really hard to quantify.

But it's difficult to quantify, and it's difficult to know what the counterfactual is as well.

Right, but it fracturing has contained to those areas, then it only affects about ten to fifteen percent of global trades and of course, most global technological development is happening within blocks rather than the exchange of ideas between blocks.

So at a global level it could be more limited than many people might suppose, but there will be an asymmetry in terms of who's affected.

So I think if the US can keep its blocked together, doesn't push India away, can keep the EU on side, then most of the costs are going to be borne by China because the economic diversity of its block is pretty limited.

It's a smaller block.

It dominates its block to a much greater extent than the US does its block.

But coming back to your point about can we contain it to these areas.

If we can't and it's a much broader split between the two blocks, then the economic costs become much greater.

It may be something in the order of two to four percent of global GDP, which again might not sound very much, but that's about the losses that were imposed by the global financial crisis.

We now think the globe global GDP is about two to four percent below is pre GFC trend, So that's the essentially the permanent hip from the GFC.

So we're looking at potentially, if you get a much wider split another global financial crisis, albeit clearly spread over a number of years, rather than a happening at once.

So the form that fracturing takes will really determine the economic consequences.

Okay, well, let's stick with the optimistic view that it only affects the ten to fifteen percent of global trade one percent of global GDP.

If that were to happen, how does that affect, say, inflation?

Everything feeds into inflation, But things, say, for example, energy prices, rare earth prices that we know we're already seeing the beginning of a new commodity super psycle, right, and that could be massively exacerbated by, for example, more restrictions are already quite a lot of restrictions, but restrictions on processed rare eers from China, or restrictions on the West stability to get raw rare eerths from Sub Saharan Africa, etcetera, ecceter There's all sorts of things here that could feed into a very volatile inflation environment.

Indeed, and I think volatility is the key point here.

If you said to most economists we're going to roll back some elements of globalization, what's the impact on inflation.

I think the response would be while there's going to be inflationary clearly, and I think a bit of context is important here.

Globalization was only one element that pulled down inflation through the eighties and nineties and two thousands, and I suspect it probably wasn't the most important either.

The most important was reform of labor markets, product markets, independent central banks, inflation targeting all of that stuff, running fiscal policy more responsibly they had.

That had by far the bigger impact in my judgment, on bringing down inflation than globalization.

Globalization, if you like, was the icing on the cake, the cherry on the top.

So if a bit of that globalization gets rolled back and some trade barriers go up and only affects fifteen percent of global trade, and to the extent that in the West we're moving production out of China and we're putting it in Vietnam and India and Mexico for these strategically important goods, then it's going to another low cost producer.

And if it happens gradually, we know from other firms that have shifted supply chains to de risk them.

So if you look at Toyota after the twenty eleven Fukashima disaster.

It rejigits supply chains to de risk them, have removed single points of failure, didn't contribute much to overall costs, So I think the inflationary consequences might be more limited than one supposed.

I think volatility, though, is the key point.

So I think we're going to head into a world where inflation is more volatile.

And you mentioned rare earths in critical minerals more generally, but if you think about how that's playing out, what's happening is China's putting on export controls, and what that's doing effectively is restricting the global supply of these minerals.

The price therefore goes up, and as the price goes up, that's then incentivizing the production and then the exportation of other sources.

So we're seeing rare earth minds reopen in California, in Arkansas, in Romania, and so on and so forth, and so the global supply will go up and that will then bring the price back down.

Back to the old The solution to high prices, as high prisis.

Exactly so the consequence there is that you end up with more volatile inflation a period of high inflation that essentially is cure cures itself by allowing supplier to respond.

So my subposition is that we've been through this kind of nice period where non inflationary, constant expansion, et cetera, et cetera, low inflation, staple inflation.

I think we're going not necessarily to a world where inflation is structurally higher three or four percent, but just that it's more volatile.

Three percent one year, one and a half percent the next year, et cetera, et cetera.

I want to move on to talking about how this might affect asset classes and ordinary investors in a minute.

But we're talking very much as though this is a bit like an economic Cold war for a small part of the global economy.

But obviously we're now talking about a world in which geopolitics have a much bigger influence than previously, not just on resources, but also on the way politicians interact.

Is there a danger do you think of geopolitical situation getting worse and worse and this economic division becoming not just an economic division, but a risk of further conflicts, the risk of war.

Exactly.

Yeah, And if you're of a particularly cheerful disposition, and you need being down to earth.

Then there's a whole chapter in the book, chapter eight that talks about how could it all go wrong?

And there's lots of different ways in which you can visit that this fractured world could evolve in a much warm, aligned way, which talks about some of them that there's a deeper slit between the two blocks.

The big risk for America is that it turns inwards pushes away its allies.

In that sense, America first would really be America loss, because it would be the biggest loser.

But the one that should keep us all awake at night is the risk of conflict between the two blocks, and that can emerge from the several flashpoints.

Clearly that the South China Sea in China's presence there, and disputed islands and lands and so on, but in Taiwan the other obvious flashpoints.

Now I'm a lonely macroeconomist, I'm not necessarily going to tell the possibility or probability of the two sides come into conflict.

I do know that if the two sides do come into conflict, then the least of our concerns is going to be what the impact is going to be on global GDP.

But there are some estimates in the book.

Some people have done some work looking at this, maybe including your colleagues at Bloomberg.

Actually possibly, you know, Knox ten percent off of global GDP if the US and China come to blows over Taiwan, primarily through repercussions through the global chip industry.

But of course it doesn't necessarily need to be a full blown war.

It could be a blockade that the restricts the flow of these semiconductors, and that would having a knock on impact to to kind of risk appetite and markets and et cetera, et cetera.

Yeah, or a cyber war.

Exactly, it's a cyber water again, particularly when it comes to Taiwan.

Images of conflict over Taiwan conjure up this.

This kind of image of the kind of amphibious land is kind of a D Day type conflict from China, the pla storming the beaches.

I don't think that's probably how, in all, like me, how things would play out.

It was much more likely to be blockade, cyber war, et cetera, et cetera, et cetera.

Well, none of this is pleasant.

Let me ask you one thing we haven't talked about again is capital flows.

So we've talked about physical goods and the end of cutting back of trade in those areas, but what about the way that capital moves around the world in a fractured system.

Well, a couple of really important points to make from the start here.

If you think about things through the lens of macro rather than the markets, then really global capital flows are just the flip side of global trade flows.

And so if China is running these large trade surplaces, which is the kind of fundamental source of tension between the US and China and a driver of this fracturing, then it must also be amassing large amounts of external assets.

That's just the logic of running a trade surpas, and those assets have to go somewhere.

And the sheer size of the accumulation of China's external assets are now close to nine trillion dollars on some estimates, a bit opaque, but about nine trillion dollars means that dollar markets are the only place that they could they can really go.

So I suspect that there's going to be greater friction in global capital flows in future.

I think there's now a widespread acceptance amongst policymakers, even the IMF, saying that unfettered free flows of capital is not necessarily a good thing.

But I'm deeply skeptical of the idea that we're going again back to the kind of nineteen thirties where the kind of big restrictions on global capital flow is a big dropping global capital flows in total.

And also that China can disentangle itself from US dollar markets.

I don't think it can, just because of the sheer size of its external assets.

Okay, so we can put that aside as a big worry.

That's going to be all right.

I think so.

I mean, I think to the extent the global capital flows in future are going to be smaller as a share of global GDP.

I think it's more likely to be because policymakers come to the conclusion that actually some of the kind of frothy hot maney is not necessarily a good thing.

It creates a financial honorabilities embedded in the system, And there's a bit of a that there's a pushback against some of the kind of Washington consensus idea of unfettered free capital flows being an unalloyed positive rather than it being China in the US pulling apart and erecting a big kind of capital wall between these two blocks.

I think that would happen in some areas.

So I think particularly in private markets where rules around foreign investment are a bit more opaque, I think there's going to be much greater reticence on behalf of Western investors in getting involved in China and investing in China.

And we see some of that already in the data.

But I think generally at a global level, capital flows remaining relatively high would be would be my base case.

Okay, so under the key point for this podcast anyway, what does all this mean for our portfolios?

What does it mean for the future of investment?

We have been taught, haven't we relentlessly over the last over many years, that a globalized portfolio is the best portfolio, and that our pension money and our is money can float all over the world.

In fact, everywhere is better than the UK.

So that's been the last couple of decades.

What now, what does this mean for the ordinary person looking at their SIP and their ISA and saying, Okay, we're not globalized anymore, We're fractured.

Where do I move my money.

Well, you're right that a key aspect of the latest wave of globalization, the most recent wave of globalization has been massive financial integration, and that was something that was not necessarily present in previous waves of globalization.

And part of that was this idea that we should all be investing our and SIPs et cetera, et cetera across the world in the fast growing emerging economies too.

My suspicion is that some of the glosses come off of that already, not at least because returns in some emerging economies have been pretty weak.

But that's the direction of travel, and it's the direction of travel that we're heading towards now.

A lot will depend upon the form that fracturing takes.

As I've said in terms of the macro consequences, if we get a more limited contained form of fracturing, then I suspect what it means in practice is that you and I were thinking twice before we invest significant portions of our sip and is in Chinese equities, but it doesn't really affect the extent to which we put our money in the S and P or for that matter, European stocks.

And I think when it comes to private flows, cups economist.

We're speaking to clients all the time in private markets.

There's already some reticence about investing in China and China's allies sanctions risk as much as anything else, and I think that that continues to intensify too, so much greater reticence reluctance to invest in China itself, I suspect.

But it doesn't mean that we stop investing globally, no, I don't think so.

Does it mean that we should allocate more to commodities and gold for example.

Well, I think that's happened already to some extent with gold.

So gold is seen by some emerging market central banks, particularly the Chinese Bank, is a way of kind of mitigating some risk of exposure to the to the dollar and limited sanctions risks, and that's been a key factor behind the rise in the price of gold over the past eighteen months two years in my view.

So some of that is already in the market, clearly, if you're a savvy investor that can identify those particular critical minerals that China has a chokehold over, and there's humpty in different rare earths.

The names of which we've never heard of.

Germanium and gallium were two big ones last year I'd never heard of.

But turns out China has a stranglehold over these rare earths and they're now a scrambled to develop alternative sources.

It's the processing they have a stranglehold of, exactly, rather than the mining.

Rather than the deposits of them exactly.

So the key point about rare earth is that they're not that rare, they're pretty prevalent.

Is that is that the mining and the processing, particularly the processing the processing is really dirty work, which is essentially we'd euxhource that to China for environmental reasons and now so you know, if you can work out where those chope points lie and develop domestic sources off them, then there's clearly opportunities or opportunities there too.

It sounded so wrong that sentence, by the way, Now it's dirty works, so we've outsourced it to China for environmental reasons.

The environmental impact is exactly the same.

It's just happening somewhere else, I mean.

Exactly the same.

At a global level, the environmental impact is exactly the same.

But for domestic political reasons, we've decided that we took a decision kind of fifteen twenty years ago that someone else could do that.

Thanks very much, and not just on that interesting Okay, Can I just argue briefly then about the US market, partly in connection to your ideas about the fractured age, but also in general.

A lot of our listeners will be holding global track of farms globally, yes, whatever else will be very very exposed to the US and still very exposed to big tech companies.

Is that a reasonable place to be?

Well, I think it's a reasonable place to be in terms of future growth when it comes to kind of big tech and AI in particular, I'm pretty bullish, I have to say, in terms of the kind of productivity benefits that that's going to eventually deliver.

It's not delivering them right now, but I think if we wind the clock forward five ten years then it will start to have delivered them.

Clearly, some of that's reflected the price of these hyperscalies and big tech stocks already.

Now.

The question we always get is is this a bubble?

And it does look pretty frothy, doesn't it when you look at some of the kind of valuations that these firms are trading on.

And then the question becomes for investors, if you're already invested, do you hang on?

If you're not invested, do you try and ride the coattails of the kind of this bubble?

And when do you get out?

And that that's an incredibly difficult question to answer and one that will depend upon individual's preferences and risk appetites and particular circumstances.

My sense would be that we've been through a period where returns on US equities have outperformed those comfortably that those of other develop markets, particularly here in the UK.

I suspect that that performance will narrow over the coming years, just because a lot of that valuations are extremely high.

I don't see that there's the same scope for price gains.

So I suspect that it's going to be impossible to ignore some exposure to the US just because of the scale.

But the relative act performance of the US compared to the European markets and markets in the UK will start to diminish.

Okay, so expected a little mean reversion in relative terms at least.

Yeah.

Indeed, brilliant, Neil, thank you, thank you so much.

Can I just ask you one last question.

Obviously, we are recommending that everybody buys this book and reads it immediately the fractured agent body go out by it.

Read I'm losing my star review as well, leave.

Five star reviews, and then once you've done that, don't forget to leave your five star review for the podcast, because that matters too.

Indeed, Neil, you've written this, what are you reading.

I'm halfway through Dan Wang's book break Neck on China, which is really good choke point again on the global economy and strangleholding.

Certain parts of it's really really good too.

I'd recommend both of those books to listeners again about the feature the global economy and the relationship with the US and China within it.

Okay, excellent, Thank you, though we must remember by the way that books aren't was right.

I was telling I think John on podcast the other day about going through my bookshelves to deliver some books to the Library of Mistakes, and there's quite a lot called things like the end of China and that kind of thing.

Yeah, maybe version two, the second edition of this will be the kind of unfractured age.

Maybe, who knows.

Anyway, thank you so much for joining us today that was absolutely fascinating.

Thanks for having me.

Thanks for listening to this week's Merrin Talks Money.

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