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January 24, 2019

A Dour Start to the Year in Davos

Every year around this time, a slew of CEOs and high government officials descend on the Swiss town of Davos for the annual World Economic Forum. It is a big deal and always invites a lot of chatter and criticism regarding the wealth of the richest billionaires that attend.

Last year, the WEF almost sprained its collective arm patting itself on the back for doing such a great job with the global economy. Global equities had rallied and markets seemed really strong. Then trade tensions, political upheaval and finally, a sharp retreat for the stock markets, put a real damper on the mood as the event got started.

This year, several notable attendees are absent. President Trump and the entire U.S. delegation did not attend due to the government shutdown. It was just last year that Trump became the first U.S. president in years to even attend. The fact that he's not there this year means that a rumored meeting with senior Chinese officials — that might have been be a precursor to a breakthrough on trade — won't take place after all.

But it is not just the President who is absent. French President Emmanuel Macron also did not attend due to his political troubles at home and British Prime Minister Theresa May, of course, is bogged down in that seemingly unsolvable quagmire of Brexit.

The global economy is also in a far different place this year. The International Monetary Fund has lowered its global growth forecast for 2019 from 3.7 percent to 3.5 percent. Price Waterhouse Coopers released a survey of North American executives on their optimism, with the result being a glass definitely more than half empty — 37 percent of those surveyed said they are optimistic about the economy this year, down from 63 percent last year.

My View: One commentator in Davos mentioned that the forum suffers from “proximity bias" — everyone remembers only what happened in the last few months. If you listen to the participants though, they are talking about “mood" even as they see a difference in many facts of the economy. My sense is that, just as last year's forum was too optimistic, this year's gathering is too pessimistic. WEF 2020 will probably look back on 2019 and realize that it was not all that bad.

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