Will Sino-US confrontation, de-globalization, and de-dollarization affect the long-term investment value of US stocks?

I know many investors ge nerverse on Sino-US confrontation, this post it about this topic.

Table of Contents

The origin of this article

A while ago, I accepted an exclusive interview with podcast host Justine (please refer to the previous post “The Rules of 10 Baggers Key Takeaways, and podcast interview). Afterwards, the host also raised the following question (italics below), Want to hear my opinion.

In addition, I would like to ask you, I know that you think that the situation of the management should not affect the decision-making direction of investors, but the events that have happened in recent years are too unusual and may affect the investment habits of the world. What do you think?

For example: the rise of trade protectionism and de-globalization have resulted in supply chains changing from long chains to short chains; and rising interest rates will also affect the valuation of stocks, technology stocks, or growth stocks; the status of the US dollar seems to be gradually losing its absolute advantage (Aren’t China and Russia just looking to break free from the dollar?)

I don’t know what your personal thoughts are?

De-dollarization

Some readers asked me about this aspect before, and I wrote it as a blog article “Should investors care about currency exchange risk when investing in US stocks?” I reproduced the relevant content as follows, in italics below):

In fact, only the U.S. dollar is the most influential right now (this topic is too big, so I will talk about it when I have time). Compared with other countries, the U.S. dollar exchange rate is relatively stable, and the U.S. dollar exchange rate cannot “fluctuate greatly” because the impact is too great.

According to statistics from the Bank for International Settlements, the US dollar accounted for more than 70% of global official foreign exchange reserves in 2000 and about 60% in 2020.

In recent years, the US dollar’s share of global cross-border remittances has indeed declined due to the competition between the renminbi and the euro, but it still accounts for more than two-thirds of the repressive proportion. Moreover, the comprehensive national strength of the United States is still unique, and those who are alive now should still be like this in their lifetime.

China and Russia have tried every means (and are still in progress) to de-dollarize in the past ten years. But in fact, it can only be used in a small number of fields, such as the trade settlement of bulk commodities between China and Russia, because the United States can’t reach out to this matter. The two countries have also launched their own alternative networks to get rid of the SWIFT global money transfer, so far without great success. But general merchandise progress is slow because manufacturers still need dollars.

Oil-producing countries in the Middle East, India is also beginning to adopt similar approaches in some fields; but compared with China and Russia, it can be said to be insignificant.

Rise of trade protectionism

All the actions of the United States, to put it bluntly, are to benefit themselves. As long as it is absolutely beneficial to the United States, the United States will not give up its nationalization, its oppression, coercion, and control of other countries in the world, so as to maintain the advanced life of Americans and maintain its leading position.

Therefore, as long as it is beneficial to the United States, the United States will support it. On the contrary, the United States will oppose it, and this is the logic. It is impossible to avoid trade protectionism, because the United States still needs to import goods from other countries to maintain its own strength.

Please note: Modern commodities are not as simple as food and daily necessities, and the quantity and complexity of commodities are beyond your imagination. This is why the United States has imposed various embargoes and sanctions on China since 2018, even if it wins over the white camp in the West. In a few years, it will surpass the trend of the United States.

Deglobalization

Impossible. Because of the current world, the reality does not allow this to happen, and it cannot happen. Now it is not the Cold War era 40 years ago, when the Western camp was dominant in all aspects and could control the world’s resources and economy. Because the current global supply chain is much more complicated than it was 40 years ago, it is impossible for a few countries to control it single-handedly.

Politically, unilateralism cannot come true, because although the non-white camp is not strong enough to confront the white camp in the West, it still has certain strength and voice. For example, voting on the organization of the United Nations system is basically one country, one vote. Although the Western white camp is strong, it is in an absolutely weak position when it comes to voting at conferences.

Readers may think that the United States is still doing its best (just as the United States did not obtain the authorization of the UN Security Council to send troops to Iraq, but the United States just created an Iraq with weapons of mass destruction out of nothing, which is extremely unlikely to happen again now), but now the world The situation is no longer decided by the single country of the United States (if you doubt this sentence, then you obviously don’t know enough about the world situation).

Technology

I previously published “The hardware and software gap between China and US, is all China-made software and hardware possible?” According to the article, there is still a clear gap between China and the United States in terms of technology. However, this does not mean that China is completely powerless in technology without the United States. In fact, China has alternatives in many fields of science and technology, but they are less effective.

Moreover, investors who care about current affairs should know that China has many technological fields, such as electric vehicles, power batteries, rare earths, quantum computing communications, nuclear fusion, solar energy, space, hypersonic missiles, high-speed rail, maglev trains, artificial Some fields of application of wisdom have already surpassed that of the United States, and this trend is difficult to change; it means that in the long run, the technological strength of the two will be closer.

Closing words

People who are alive now, including you who are reading this article, in your lifetime, the United States is still the hegemony of the world, and investing in US stocks is still the most profitable way to accumulate assets.

Sino-US confrontation will not hurt U.S. stocks too much.

The following is an overview of the development of new innovative technologies in some important countries in my blog, or brief articles:

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