Tyler Mordy breaks down the economic questions gripping much of the world as nearly half the global population goes to the polls
The deafening noise of the US election may have kept some observers naïve to the fact that more than half of the world is having an election this year. Around four billion people are voting or have already voted in 2024, including some of the world’s largest and most important countries. Whether fully fair and free or not, 2024 has and will see elections in Bangladesh, Brazil, India, Indonesia, Mexico, Pakistan, Russia, and the United States. Those elections open the door to massive global upheavals and the potential for significant market impacts.
Tyler Mordy is watching all those elections closely. The CEO and CIO at Forstrong Global Asset Management Inc., has been on the ground in some key countries, watching to see how elections might shape the future of global equity markets. While each country is engaging internally on many unique issues, Mordy notes a common question emerging in many of these elections: how closely the world wants to align itself with the United States.
“As you look at the conversation surrounding this multitude of global elections, relations with the Untied States have been central to the discussions. A lot of countries are reevaluating their approach to trade, diplomacy, and security and recognizing the need to engage more broadly with other players and diversify their partnerships,” Mordy says. “What’s interesting is that in the US despite substantial differences in policy platforms between Democrats and Republicans, there’s one major point of policy convergence, which is that both parties are now aggressively pursuing protectionism.”
While the nature and scale of that protectionism is a bone of contention between the two parties — as shown in the recent Presidential debate — Mordy notes that the two parties take protectionism as a given. The debates we now see around the world about the degree of engagement or disengagement with the United States, he adds, could be in part a product of the US decision to pull back from the world.
Mordy has seen this debate play out most acutely in Mexico, where the left-wing MORENA party won handily in June and the MORENA candidate Claudia Sheinbaum was elected President. Mexico has been a favoured country for ‘near-shoring’ or ‘friend-shoring’ where manufacturing operations are moved from a supposedly less-friendly country, namely China, to a more friendly country.
Mordy notes, though, that Mexico has also become a backdoor for Chinese exports to circumvent US tariffs. Mexican imports from China are up nearly 50 per cent above their pre-pandemic levels. Mexico is deeply dependent on the United States but the debate that the country engaged in during its election was around creating more trade diversification and pulling back from the US relationship somewhat.
The Indian election was also a key story from 2024. Prime Minister Narendra Modi’s unexpectedly diminished majority spooked markets somewhat with Indian equities selling off briefly. However, the growth story in India remains strong. Modi has retained his hold on power and the country appears focused on enhancing its position globally, engaging more broadly with other countries — including the US. Key to the India story has been its massive investment in infrastructure, which now represents a huge percentage of its GDP. India’s internal investments and external bridge-building, Mordy says, reflect how trade an interconnectedness have helped enrich less developed nations and has stimulated global growth.
Tariffs and protectionism, Mordy notes, have been consistently proven as bad economics. While globalization has had some negative impacts, he believes that the broadly positive forces of integration and wealth creation have outweighed the costs. Tariffs, especially, function as a tax on domestic consumers and a self-inflicted economic wound. The trouble is, while protectionism is bad economics, its great politics, which is why the US seems so set on maintaining a protectionist stance.
So as the US debates just how far it will pull back from the world and the world debates how close it wants to be with the US, investors are left with decisions to make. Despite the retreats that some countries have made from globalization, Mordy notes that we still live in a deeply interconnected world. In that environment, Mordy maintains his belief in broad global diversification. Holding multiple asset classes across multiple currencies can balance against geopolitical risks in any one country. A rise in global fragmentation, however, opens opportunities for differentiation.
“The silver lining of fragmentation is the decline in correlations across major regions like Asia, Europe, and North America,” says Mordy. “Asset classes and currency levels have become less correlated and more volatile compared to the period of unfettered globalization. This shift is actually beneficial from an asset allocator’s perspective as it allows global diversification to function effectively again, rather than facing a monolithic market where performance is tightly linked.”
