AFR Business Summit: Blackrock’s Wei Li higher rates and inflation versus Macquarie’s Viktor Shvets’ artificial intelligence’s deflationary wave

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Are we headed for a world of higher rates, lower growth and more volatility, or will AI unleash a deflationary wave?

on Monday, there was plenty of the near-term politicking you would expect a year or so out from the next federal election.

It was BlackRock’s global investment strategist, Wei Li, who warned that the world has shifted from a period of low inflation, low interest rates and low geopolitical tension – the “great moderation”, as she calls it – to a new regime typified by higher inflation, higher rates and greater geopolitical tension.The central difference, she said, stems from the underlying drivers of economic growth.

That will make for a more volatile world, where the easy market gains of the post-GFC period will fade, and a much more selective approach to investing will be required – opening the door to big gains, but also big losses. The information age will continue lowering marginal costs of almost everything towards zero.Macquarie’s strategy guru, Viktor Shvets, argues that the higher-cost world that BlackRock sees – rising labour costs as the population ages, rising input costs from reconfigured supply chains, rising energy costs from the low-carbon transition – will be totally blown away by AI, which will unleash a wave of deflation.

A big chunk of white-collar jobs could be gone in as little as five years, he argues, and factories will start disappearing as the combination of AI and robotics rips through manufacturing and distribution.

 

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