Economics and markets

What slowing global trade growth means for asset prices

October 10, 2021

Such a trend raises a natural question: Is globalization dead?

The allure of global trade is understandable

1The average annual S&P 500 Index price return from 1990 to 2018 was 7.4%. Three factors make up this return: valuation expansion/contraction (dollar paid per dollar of earnings), earnings growth from revenue growth, and earnings growth from ratio of earnings to revenue (profit margins). Contributions from these factors were 0.8%, 3.7%, and 2.9%, respectively.

Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.

A slowbalization scenario is the most likely outcome
The illustration plots global trade growth starting in 1992, including a sharp contraction at the time of the 2008 global financial crisis, and continuing with Vanguard’s projections into the 2030s under three scenarios. We believe that Scenario 2, a “slowbalization” scenario in which trade grows at a pace between that of a pre-global financial crisis globalization wave and that of a post-global financial crisis trade reversal, is the most likely outcome. Only the post-crisis scenario results in a contraction in global trade growth in the coming decade.

Risks to investors may not be as great as they seem

Vanguard Insights

Subscribe to Economics & markets.

Get timely analysis on the market, delivered straight to your inbox, as soon as we publish them.

Read our privacy policy to learn about how we keep personal information private.

Vanguard Insights

Thank you for subscribing to Economics & markets.

You'll be notified when new content is published, but will only ever receive one email a day from Vanguard Insights.

Vanguard logo

Vanguard is the trusted name in investing. Since our founding in 1975, we've put investors first.