Millennials to redistribute wealth from older generations to the young in new ‘age of disorder’, warns Deutsche strategist


It probably won’t take a great deal of persuasion to convince investors that there’s an “age of disorder.”

That’s the title of a new Deutsche Bank research note, which says the world is entering its sixth distinct era of modern times.

So say goodbye to the “era of globalisation” and brace yourself for the “age of disorder” where millennials, firmly established as the generation of ‘have nots’, take their revenge and redistribute wealth from the old to young. Millennials are usually defined as those between the ages of 22 and 38 years old in 2019, according to Nielsen Media Research .

The note by strategist Jim Reid warns the discussion of inequality within and between countries will not be limited to wealth and income.

“In fact, an issue that is quickly emerging as a political force is the intergenerational gap,” the report says. “Assuming life does not become more economically favourable for Millennials as they age (many find house prices increasingly out of reach), this could be a potential turning point for society and start to change election results and thus change policy.”

Read: Millennials’ shifting tastes are boosting sales of whiskey and tequila

The votes for Brexit in the U.K. and President Donald Trump in the U.S. in 2016 left many younger people feeling angry and alienated by political decisions that a sizable majority of them were against, the report says.

This could see the revenge of the millennials as they take more control and skew policies to redistribute wealth away from older generations to the young.

“Such a shift in the balance of power could include a harsher inheritance tax regime, less income protection for pensioners, more property taxes, along with greater income and corporates taxes . . . and all-round more redistributive policies”, the Deutsche Bank report said.

The ‘new’ generation might also be more tolerant of inflation insofar as it will erode the debt burden they are inheriting and put the pain on bond holders which tend to have a bias towards the pensioner generation and the more wealthy.

“The older generation may also have to be content with lower (or even negative) asset price growth if the younger generation does not have a sudden income boost. This will be a big break from the status quo and lead to far more disorder than in the prior era of globalisation.”

Read: Gen Z, Millennial Investors Embrace Risk Amid Covid: E*Trade

The report suggests 2020 may be the start of a new era, as the coronavirus pandemic brings the era of globalization since 1980 to a close.

“The era of globalisation to we are likely waving goodbye saw the best combined asset price growth of any era in history, with equity and bond returns very strong across the board. The Age of Disorder threatens the current high global valuations, especially in real terms,” said the report.

What will this new age bring?
• Deteriorating US/China relations and the reversal of unfettered
globalisation.
• A make-or-break decade for Europe, with muddle-through less likely
following the economic shock of COVID-19.
• Even higher debt.
• Inflation or deflation? As a minimum, it is unlikely it will calibrate as easily as we saw over the last few decades.
• Inequality worsening before a backlash and reversal takes place.
• The intergenerational divide also widening before millennials and younger voters soon start having the numbers to win elections and, in turn, reverse decades of policy.
• Linked to the above, the climate debate will build, with more voters
sympathetic and thus creating disorder.

We’re in the midst of a technology revolution with astonishing equity valuations reflecting expectations for a serious disruption to the status quo, the report says, questioning whether this is a revolution or bubble?
Much depends on whether working from home becomes more permanent, and if so it predicts it will cause major changes to societies and economies.

Tesla
TSLA,
-21.06%
,
Amazon
AMZN,
-4.39%

and Facebook
FB,
-4.09%

are all companies that have seen their valuations soar in recent times on Nasdaq
COMP,
-4.11%
.

Read: Opinion: China’s economy may be back on track, but problems plague it elsewhere

The most worrying prediction is an economic battle between the U.S. and China.

“The result of the US election in November is unlikely to change the direction of travel,” the report says. “Over the course of this decade, relations will likely deteriorate into a bipolar standoff as both the US and China seek to prevent encirclement by the other. Companies that have embraced globalisation will be stuck in the middle if relations sour as we fear.”

There have been 16 occasions over the last 500 years, when a rising power has challenged the ruling one, and on 12 occasions it ended with war. One piece of solace is the report notes that military conflict is unlikely.

Watch: Donald Trump suggests ‘decoupling’ US economy from China



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Last chance saloon for U.K.-EU trade talks, as Johnson threatens to walk out on deal


Negotiations between the European Union and the U.K. about their future trade relations enter the last chance saloon on Tuesday, as both sides meet for yet another round of talks one day after U.K. Prime Minister Boris Johnson threatened to walk out if a deal isn’t struck by October 15.

– The two sides failed to make any progress over the summer and remain stuck on the question of what type of “level playing field” the U.K. should accept, to reassure Europe it won’t undercut it on matters such as labor or environment regulations. The economically minor problem of fisheries, and who will be able to trawl in British waters, has also proven a serious bone of contention.

– The U.K.’s top government lawyer, Jonathan Jones, quit on Tuesday over Johnson’s intention to renege on parts of the “political declaration” the country signed with the EU last year along with a “withdrawal agreement” in the run-up to Brexit. The deal, which has the legal strength of an international treaty, aimed at avoiding that a new border be erected between the U.K.’s Northern Ireland region and the Republic of Ireland.

– British industrial lobbies have warned in recent weeks that the U.K. government has failed to take the necessary steps to avoid a massive logistical problem at the border if the two sides failed to clinch a deal. Major disruptions are also expected in industrial supply chains or food imports.

– The long-term cost of a no-deal Brexit for the U.K. economy would amount to some 5.7% of the country’s gross domestic product, far higher than the coronavirus impact, which will cut gross domestic product by 2.1%, according to a recent London School of Economics paper.

Read: U.K. economy ‘quite likely’ headed for more monetary stimulus — Bank of England official

The outlook: Europeans are still trying to decipher whether Johnson’s threats are serious or amount to more saber-rattling before the PM agrees on a compromise, as he did last year when signing the withdrawal agreement. But both sides are ramping up their preparations for the worst-case, no-deal Brexit scenario. Meanwhile, Johnson is facing another political crisis within his own camp, more divided than ever between the far-right Brexiteers and the more moderate Tories.

Read:Europe is considering new sanctions against Russia after the Navalny poisoning. But will it bite or bark?



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Asian stocks mixed as investors wait for Wall Street to return from break


Japan’s Mount Fuji is seen during morning hours from Tokyo on April 23, 2020.


charly triballeau/Agence France-Presse/Getty Images

Asian shares were mixed Tuesday, after European stocks rallied and U.S. markets were closed for the Labor Day national holiday.

Investors are focusing on uncertainties over the coronavirus pandemic and hopes for a vaccine. Attention is now on how Wall Street might pick up after the holiday break, given the decline that came last week after months of surging prices.

Japan’s benchmark Nikkei 225
NIK,
+0.64%

gained 0.4%. Australia’s S&P/ASX 200
XJO,
+0.63%

added 0.8%. South Korea’s Kospi
180721,
+0.70%

gained 0.5%. Hong Kong’s Hang Seng
HSI,
+0.30%

was down 0.5%, while the Shanghai Composite
SHCOMP,
+0.87%

slipped 0.3%.

“Traders and investors alike may slowly but surely come around to the idea that last week’s market rout was tech sector-specific, rather than any real change in underlying sentiment,” said Stephen Innes, chief global markets strategist at AxiCorp.

“There was nothing ‘fundamental’ behind last week’s equity sell-off, but it will most certainly take a while to clear all the option-market after-shocks,” he said.

Wall Street’s slide on Friday followed a Labor Department report that showed U.S. hiring slowed to 1.4 million last month. That was the fewest jobs added since the economy started bouncing back from the initial shock of the pandemic. The United States has recovered about half the 22 million jobs lost during the crisis.

In Europe, another round of Brexit trade talks is scheduled in London for later in the day. On Monday, the European Union warned the British government that any attempt to renege on commitments made ahead of its departure from the bloc earlier this year could put at risk the hard-won peace in Northern Ireland. Britain left the bloc on Jan. 31, but the two sides are in a transition period that ends at the end of this year and are negotiating their future trade ties.

Riki Ogawa at the Asia & Oceania Treasury Department at Mizuho Bank in Singapore warned that plenty of other uncertainties remained, such as President Donald Trump’s comments about “decoupling” the U.S. economy from China, as the presidential campaign heats up.

The Asian region depends heavily on a healthy Chinese economy, and trade with the U.S., as well as with China.

“We appear to be short on clarity,” said Ogawa.

Benchmark U.S. crude
CL.1,
-1.96%

fell nearly 2% to $38.99 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude,
BRN00,
-0.19%

the international standard, added slipped 5 cents to $41.96 per barrel.

The dollar inched down to 106.26 Japanese yen
USDJPY,
-0.03%

from 106.27 yen. The euro
EURUSD,
+0.03%

fell to $1.1811 from $1.1817.



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Pound retreats on hard-line U.K. Brexit stance


A commuter walks across the Millennium Footbridge over the River Thames in central London, England, on September 7, 2020.


adrian dennis/Agence France-Presse/Getty Images

The pound retreated on Monday against both the dollar and the euro, after the U.K. government took a hard line ahead of the restart of trade talks with the European Union.

U.K. Prime Minister Boris Johnson said the country could walk away from the talks within weeks and said that a so-called no-deal exit would be a “good outcome for the U.K.” The Financial Times reported the U.K. was planning domestic legislation that would water down commitments to maintaining an open border between the U.K.’s Northern Ireland and European Union member Ireland.

The pound
GBPUSD,
-0.94%

fell to $1.3194 from $1.3281, and against the euro
GBPEUR,
-0.81%

to €1.1150 from €1.1218.

“It seems odd, to say the least, that the U.K. could be about to undermine its commitments to Ireland with upcoming legislation after the U.K. had recently taken steps in recent months to prepare Northern Ireland’s border for exit day. It suggests the U.K. is trying to increase the pressure to get a deal more to its liking rather than going for a hard exit,” said Kallum Pickering, senior economist at Berenberg.

Adrian Paul, European economist at Goldman Sachs, agreed the U.K. was still likely to agree a deal. “In the absence of a free-trade agreement, Prime Minister Johnson would face the triple threat of a resurgent Scottish National Party, an increasingly popular leader of the Labour Party, and a crucial test of competence in the recovery from COVID-19,” he writes. “We maintain our central view that the terminal outcome of Brexit negotiations is most likely to be a ‘thin’ FTA ratified by December, with zero-tariff/zero-quota trade in goods but significant non-tariff barriers predominantly affecting trade in services.”

The broader FTSE 100
UKX,
+1.49%
,
meanwhile, was helped by sterling weakness, with the top U.K. stock-market index rising 1.4%.

Associated British Foods
ABF,
+1.13%

rose 3%, after saying trading in the fourth quarter ending Sept. 12 in both its food businesses and retailer Primark exceeded expectations.



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As schools reopen, scientists say some children could spread COVID-19 even if they already have the antibodies


As schools and colleges reopen across the country, scientists say social distancing remains a critical public-health response to COVID-19. New research released Thursday sheds more light on children who test positive for COVID-19, and the contagiousness of coronavirus. Children often remain asymptomatic or display very few symptoms, and the research also offers insights into the course of the disease at an important time for families and communities.

A study published in the latest edition of the Journal of Pediatrics finds that the virus and antibodies can coexist in young patients. “With most viruses, when you start to detect antibodies, you won’t detect the virus anymore. But with COVID-19, we’re seeing both,” says Burak Bahar, lead author of the study and director of Laboratory Informatics at Children’s National Hospital in Washington, D.C. “This means children still have the potential to transmit the virus even if antibodies are detected.”


‘Children still have the potential to transmit the virus even if antibodies are detected.’


— Burak Bahar, director of Laboratory Informatics at Children’s National Hospital in Washington, D.C.

The researchers reviewed an analysis of 6,369 children tested for SARS-CoV-2, the virus that causes COVID-19, and 215 patients who underwent antibody testing at Children’s National between March 2020 and June 2020. Out of these 215 young patients, 33 tested positive for both the virus and antibodies during the course of the disease. Nine of those 33 also showed presence of antibodies in their blood while also later testing positive for the virus.

What’s more, researchers found that patients aged 6 years through 15 years old took a longer time (a median time of 32 days) to clear the virus, meaning that it had left their systems, versus patients aged 16 years through 22 years old (a median of 18 days). Females in the 6 to 15 age group also took longer to clear the virus than males: A median of 44 days for females versus 25.5 days for males. “We can’t let our guard down just because a child has antibodies or is no longer showing symptoms,” Bahar said.

The study also found that 25 days was the median time from viral positivity to negativity — the moment when the virus can no longer be detected; it took 18 days to go from viral positivity to seropositivity — or the presence of antibodies in the blood — and it took 36 days to reach adequate levels of neutralizing antibodies. These “neutralizing antibodies” are important in potentially protecting a person from reinfection of the same virus, the researchers wrote.

Four important caveats: Firstly, the study looked at a relatively small number of children. Secondly, the next phase of research will be to test whether coronavirus that is present along with the antibodies for the disease can be transmitted to other people. Thirdly, scientists need to explore whether antibodies correlate with immunity and, fourthly, they need to establish how long antibodies and potential protection from reinfection actually lasts. As such, Bahar reiterates the need for social distancing.

Related:Dr. Fauci: It’s ‘conceivable’ we’ll know by November if a safe, effective vaccine is coming

A separate study published this week in JAMA Pediatrics suggests that children can spread SARS-CoV-2, even if they never develop symptoms or even long after symptoms have cleared. It found a significant variation in how long children continued to “shed” the virus through their respiratory tract and, therefore, could potentially remain infectious. The researchers also found that the duration of COVID-19 symptoms also varied widely, from three days to nearly three weeks.

A recent systematic review estimated that 16% of children with a SARS-CoV-2 infection are asymptomatic, but evidence suggests that as many as 45% of pediatric infections are asymptomatic, according to the U. S. Centers for Disease Control and Prevention. The signs and symptoms of COVID-19 in children are similar to other infections and noninfectious processes, including influenza, according to the CDC.


A separate study in JAMA Pediatrics said children may spread SARS-CoV-2, even if they never develop symptoms or even long after symptoms have cleared.

Under pressure from the teachers union to delay the start of the school year, New York City Mayor Bill de Blasio announced Tuesday that in-person classes will be pushed back until Sept. 21, 11 days later than planned. Remote learning, also originally slated to start on Sept. 10, will now commence on Sept. 16. Other countries have not fared so well with school reopenings. Israel, which also reopened schools this week, experienced outbreaks when it reopened schools on May 17.

Bahar also advised teachers and students to wear masks. To reduce the risk of spreading COVID-19, it may be preferable to use high-quality cloth or surgical masks that are of a plain design instead of face shields and masks equipped with exhale valves, according to an experiment published Wednesday by Physics of Fluids, a monthly peer-reviewed scientific journal covering fluid dynamics that was first established by the American Institute of Physics in 1958.

As of Sunday, the U.S. still has the world’s highest number of COVID-19 cases (6,262,989), followed by Brazil (4,123,000), India (4,113,811) and Russia (1,022,228), according to data aggregated by Johns Hopkins University. California became the first state in the country to surpass 700,000 confirmed cases. COVID has killed 188,711 people in the U.S. Worldwide, cases are near 27 million.

AstraZeneca
AZN,
-1.07%

, in combination with Oxford University; BioNTech SE
BNTX,
-1.19%

and partner Pfizer
PFE,
-0.11%

; GlaxoSmithKline
GSK,
-1.38%

; Johnson & Johnson
JNJ,
-0.64%

; Merck & Co.
MERK,
-0.95%

; Moderna
MRNA,
-3.45%

; and Sanofi
SAN,
+5.09%

are among those currently working toward COVID-19 vaccines.

The Dow Jones Industrial Index
DJIA,
-0.56%
,
the S&P 500
SPX,
-0.81%

and the Nasdaq Composite
COMP,
-1.26%

ended lower Friday. Doubts about traction for further fiscal stimulus from Washington may be one factor discouraging investors who have been betting on Republicans and Democrats striking a deal to offer additional relief to consumers and businesses.



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