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A hurricane of risk may well seem an apt summary of recent global developments. However, certain events have recently brought a period of certain calm. The question is – is the calm here to stay – or are we just in the eye of the storm?
If you have never experienced the eye of a hurricane or typhoon, it is a remarkable experience. The eye is an area of calm – usually between 40 and 65 kilometers in diameter – surrounded by the most severe winds and rains imaginable. It’s as if someone turns off a light switch for however long it takes the eye to pass over. Then all hell breaks loose again.
Two years of unrest
Over the two years leading up to this past November, our firm has received a heavy stream of inquiries from anxious, high-net-worth individuals (and their advisors). They have all asked for help constructing their Backup Plans to secure themselves and their families. Most were from the US and UK, and others followed from Hong Kong and PRC, Mexico and Brazil.
The Americans fell into two camps. Many were worried about a possible Red Wave and all the craziness that might entail. Others feared the potential tax increases that would follow the Dems holding onto both the Senate and House.
In the UK Resident Non-Doms feared they would finally lose their oft-threatened favourable fiscal regime. This fear is a growing concern regardless of which party ends up in power. In all the countries I noted, HNW individuals and families expressed that they felt as if they were in a brewing storm. They were looking for the peace of mind and security that comes with a proper backup plan.
A time of calm?
However, Rishi Sunak assumed the prime ministership in the UK in late October, and the red wave never reached the shore in the US mid-terms. These developments have slowed down the rate of inquiries we seem to be getting.
That said, people are still contacting us albeit in fewer numbers. The people still reaching out to us all take a longer-term approach to their lives and their security. They firmly believe the risks are still there. The semblence of stability is simply because we are in the eye of the storm. The prudent are using this period of apparent calm to move forward and “batten down the hatches” with their Backup Plans. They are convinced that most, if not all of the risks that existed pre-November are about to return… with a vengeance. They also predict that their respective governments will be even less equipped to deal with them than before.
Let consider just some of the risks that have not abated during this period of apparent calm:
In America
- Unfortunately the list of uncertainties and risk is long. The MAGA Republicans are now in control of the House of Representatives. They’ve shown that their mission is one of revenge against the Dems. This seems to assure 2 years of chaos for the US. This could have catastrophic economic, social and political effects (i.e. a protracted fight over the debt ceiling and a possible shutdown of government)… There is also no clear vision of what might happen in 2024.
- After a very productive first 2 years, President Biden is increasingly a lame duck. The promises of politically motivated investigations by the aforesaid House of Chaos, have been made worse by his scoring an own goal with the confidential documents. There’s also the ever increasing issue of his age. And there’s the fact that there is no heir apparent in the wings
In UK
- A seriously unpopular Conservative government seems destined to be crushed at the next general election. This must be held in the next 2 years.
- A once-influential country is now on the outside of a surprisingly unified Europe (due to Ukraine). They are dealing with a very gloomy economic outlook; and
- Both parties eye discontinuing the Non-Doms remittance regime as an easy vote-getter.
And Beyond
Meanwhile, at a global level, the breadth and depth of risks to economic, social and political stability continue to grow. This is made worse by the reality that at least three of the G7 and half of the G20 members are seriously distracted by domestic politics.
Are the world’s leading economies ready, willing and able to address these global risks?
- Recession / inflation caused by COVID, war, supply chain issues, increased protectionism.
- Continuing COVID impacts – especially among poorer countries and of course China.
- Russia’s war against Ukraine – with the direct support of China, Iran…and tacit support or silence from Saudi Arabia, UAE, India… just to name a few
- A weakened Xi and China
- Continuing mishandling of COVID
- A seriously weakened economy
- Hobbling of tech entrepreneurs
- Pushback on its Belts & Roads initiative as borrowing countries increasingly default
- Mishandling of Hong Kong
- Tacit support for Putin – while profiting from the war
- Energy geopolitics – Saudi Arabia siding with Russia and China
- Iran – increasingly unstable at home yet still fomenting instability across the Middle East and into Europe (by supporting Russia against Ukraine)
- Climate Change – can the agreements hammered out at the UN Climate Change Conference of the Parties (COP 26) and the UN Bioversity Conference (COP 15) be implemented in the midst of a global recession?
- Technology – Countries increasingly using technology to monitor and control their citizens (i.e. Pegasus)… and of course, the unrestrained growth of AI and misinformation on social media platforms
Calm amidst the hurricane of risk means it’s time to act
So yes, at the moment things may feel a bit calmer and more stable than they did a few months ago… but for how long? Indeed, after the recent embarrassing spectacle at the US House of Representatives and attack on the Capital of Brazil to protest its recent democratic election, the stream of inquiries picked up again… most noticeably by clients who had moved their backup plans to the back burner after the mid-terms and non-Doms who see the writing on the hurricane wall. They also realise that preparing for the future is not done overnight. There is a growing awareness that for Americans and UK residents that ‘wall’ is approaching very quickly.
We are clearly in the eye of the hurricane and the time to start preparing to survive the upcoming storm has already begun.
