Geopolitics through the lens of the US consumer

At the UBS Global Consumer and Retail Conference in New York City, panelists explored the interplay between geopolitics, economics, and technology through the lens of the consumer.

Views from: Admiral Jonathan Greenert, US Navy (ret.), and Jonathan Pingle, Managing Director, Chief US Economist, UBS. Moderated by Peter Grom, Executive Director, Research – US Consumer Staples, UBS.

Investors are increasingly concerned by the elevated issuance of US Treasuries, driven by escalating US debt-to-GDP levels.

“We are at a juncture where choices have become increasingly tough,” said Jonathan Pingle, adding “Debt-to-GDP is at 100% and gains from a shrinking defense budget to fund other priorities have been exhausted.” 

This directly affects the United States’ global leadership capability and spotlights the importance of the upcoming election’s role in addressing these obstacles - the outcome of which could shift future economic priorities. 

Outside of the United States, Admiral Greenert believes there are nations which conflict with Western economic objectives. Global tensions and notable trade disruptions are outgrowths of this development. Pingle echoed this sentiment and said, “concerns around oil prices, global trade, and the war in Ukraine” have led to volatility in the financial market.

Potential future flashpoints could center around breakthrough in AI, enhanced cyberattacks or new weaponry creation.

Greenert believes AI could allow simplification of processes, quicker analysis and language barrier breakdown, enabling speed-to-market for businesses and in turn boosting the world economy.

On the flipside, a security or military advantage could go unchecked, and potential breakthrough in autonomous weapon systems could also pose a threat. Pingle believes that if AI is paired with robotics, it can be enormously beneficial. That combination could allow the US to come out of the low productivity regime it has been in since 2003. 

While these changes would cause labor market disruptions, they also open up room to re-allocate and upskill the workforce.

Switching gears, the US consumer outlook seems to be pointing towards a divergent economic landscape. There are rising delinquency rates in auto and credit while asset valuation continues to grow rapidly. Although the question remains, ‘How long can this continue?’. 

Pingle also believes the US dollar’s role as a global reserve currency will likely endure.