Faster, Higher, Stronger

That is the Olympic motto – translated from the Latin expression “Citius, Altius, Fortius”. Competition breeds success, as success breeds competition. Known as one of the architects of the modern Olympics, Pierre de Coubertin believed in neo-Olympism which was the pursuit of peace and intercultural communication through international sport.  Accordingly, the equally sized, interlocking Olympic rings symbolise the union of the five continents.

When it comes to winning, however, one ring has ruled them all. In the modern Olympic era, no country has been more successful in accumulating medals than the United States of America. Perhaps not surprisingly, it is also an American that, by a very wide margin, has won the most gold (and for that matter, total number of) Olympic medals.

The world-famous Jamaican sprinter, Usain Bolt, has won an impressive 8 gold medals. He comes in tied at number 13 on the medals table, alongside American athlete Raymond Ewry. There are another four US flags between Mr Bolt and the man at the top of that list - Michael Phelps. The six-foot-four American swimmer has won nearly three times the number of gold medals that Usain Bolt has. At 23 gold medals, 3 silver and 2 bronze, Michael Phelps is in a league of his own. Interestingly, four of the top five American medal holders are swimmers.

Global equity markets have seen the same dominance. The United States has quite literally dwarfed every other country in the Olympics of equity market capitalisation. It makes up a staggering 64% of the MSCI All Country World (equity) Index with the second largest country, being Japan, creeping in at a distant 5%.

The technology sector makes up 33% of this same index with the second largest allocation going to financials at less than half of that. What swimming is for the US Olympic team – technology is for the American capital team… and yes, Michael Phelps is Nvidia… or Apple… or Microsoft. Take your pick.

Following World War II, the Soviet Union and the United States emerged as the two global superpower states – creating a bipolar world order. This however transitioned to a unipolar order after the Soviet Union collapsed, which allowed for a period of stability in the global geopolitical landscape. Stability allows nation-states to enter cross-border treaties which lays the foundations for public and private enterprise to engage in international trade and spur on economic growth. The last three or four decades are perhaps best described by de Coubertin’s, “pursuit of peace and intercultural communication through international trade”.

Transitions are typically slow, but this era looks to be at a turning point. Competition has bred success in other economies as technological and industrial development has levelled the playing field. The “Global South” are two words that have increasingly been circulated in academic and news articles. The phrase is said to have originated as early as 1969 and broadly represents the regions of Asia, Latin America and Africa with low GDP per capita and younger populations. This bloc has grown in economic strength as these nations make strategic alliances to counterbalance their more developed contemporaries.

If the rules that have governed global trade changes, it could alter either, or both, the growth trajectory that multi-national champions have been on, or the valuations assigned to them. Consider, for example, events unfolding in the European Auto industry. The emerging dominance of Chinese electric vehicles has seen Europe attempt to shield their workers from competition by imposing up to 38% in import tariffs. China is unlikely to take this lying down. The European luxury goods market, alcoholic beverages and food sectors are currently in their crosshairs.

In what seems to be a departure from the normal course of business the world has come to know, sanctions have been put in place on exporting advanced Nvidia chips to China. At the same time Chinese officials have effectively banned the use of iPhones in public office. This isn’t breaking news but rather a small collection of examples that suggests the next three to four decades might be somewhat different than the last. Much like the Olympic medals table, the capital markets medal table is unlikely to change overnight. We do however believe that more names from developing economies will be added to both over the coming decades.