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A decade ago Xi Jinping was welcomed to Duisburg in Germany’s Ruhr valley. He praised the region as a hub for Chinese investment; greeted a train that had spent a fortnight travelling from Chongqing, via Russia, to Europe’s industrial belt; and enjoyed an orchestral performance of traditional mining songs. More recently, another Chinese arrival in Germany received a frostier reception. In February a ship called BYD Explorer No. 1 unloaded 3,000 or so electric cars made by BYD, a Chinese electric-vehicle (EV) firm. As the ship’s name suggests, it is likely to be the first of many. Little surprise it has prompted worries about the future of Germany’s hallowed carmakers.China is churning out cars, as its leaders funnel cash and loans to high-tech industry in an attempt to revive the country’s moribund economy. Its manufacturing trade surplus has risen to a record high, and is set to rise higher still. As a consequence European leaders are fearful of an influx of advanced, cheap Chinese goods. On March 5th the European Commission decided it had sufficient evidence to declare that China had unfairly subsidised its EV makers, paving the way for the introduction of tariffs. Ursula von der Leyen, the commission’s president, has warned China not to “race to the bottom” on green tech. Britain has begun a probe into the country’s excavators. Emmanuel Macron, France’s president, will host Mr Xi in May. He will, according to diplomats, deliver “firm messages” on trade.Chart: The EconomistCountries from Brazil to India are moving to block China’s exports. They represent a particular threat to Europe, however, because of the continent’s growth model, which has long had trade at its heart. According to the IMF, Europe is the region of the world that is most open to trade and investment (see chart 1). In the EU trade in goods and services runs to 44% of GDP, almost twice as much as in America. As a rules-based bloc, the EU is reluctant to violate trade rules too blatantly by erecting protectionist barriers. So is Britain, which has a history of support for free trade.The new China shock arrives at a terrible time. European industry is still dealing with an energy shock caused by Vladimir Putin’s invasion of Ukraine, which began just as national leaders were attempting to accelerate the green transition. Gas prices—usually around €20 ($22) per megawatt hour—spiked to more than €300 in 2022, sending electricity prices soaring (see chart 2). A post-covid rebound turned into inflation and an energy crisis. The European Central Bank (ECB) was forced to raise rates to 4%, hitting demand in an already weakened economy.Chart: The EconomistFiscal largesse during the pandemic and energy crisis has since given way to retrenchment. Germany’s tight deficit limits have forced the country to cut back this year, with more cuts to come in 2025. France has just announced that its deficit in 2023 was 5.5% of gdp, well above forecasts. It had already pulled what Bruno Le Maire, its finance minister, calls an “emergency brake”, cutting €10bn of spending in order to bring fiscal policy back on track.Chart: The EconomistThe EU’s gdp has grown by just 4% in real terms since 2019, which is half the pace America has enjoyed. In Britain and Germany GDP per person has actually fallen (see chart 3). Official forecasts for the eu and Britain project dismal growth of less than 1% this year; beyond that, things are uncertain. Whereas American productivity seems to have received another boost during the pandemic, Europe’s is limping along. The ECB, national leaders, think-tanks and two former Italian prime ministers, Enrico Letta and Mario Draghi, are trying to work out why exactly Europe has lost “competitiveness”. At the same time, another threat looms: if Donald Trump wins America’s presidential election in November, European exporters could be subject to tariffs on sales to one of their most lucrative markets.Shock horrorSo as the continent’s economy reels from the Russia shock of 2022, how will it adapt to a new one from China and maybe a third from America? The first China shock came in 2001, when the country entered the WTO and benefited from lower trade barriers as a result, posing a challenge to Western manufacturers. In America, some regions and sectors were hit hard. Europe got off more lightly, in part because the shock coincided with the accession of central and eastern European countries to the EU. The fast development of the EU’s newest members supported the bloc’s productivity growth and created demand for Western goods.This time will be different. Although China is moving towards high-tech manufacturing in response to its economic struggles, Mr Xi is also keen to wean the country from reliance on Western industry. He wants to build technological leadership in sectors he sees as necessary for national strength, such as industrial robots and railway equipment. A weaker China aiming to be less dependent on foreign inputs will buy fewer cars, less machinery and less high-tech equipment, precisely the goods that lifted European exports during the first China shock. China’s economy is also much larger than it was at the turn of the millennium. As Adam Wolfe of Absolute Strategy, a consultancy, notes, the rise in China’s exports since 2019—moderate as a share of the country’s GDP—has already felt like a deluge elsewhere.Moreover, European firms now face Chinese competition in increasingly sophisticated markets, both at home and in third countries. Take cars, the crown jewel of European industry. The sector, along with its supply chain, employs around 3m people across the continent. Yet Chinese brands already make up 9% of the pure-battery market in western Europe, according to data from Matthias Schmidt, an automotive consultant. Across the continent, new registrations of Chinese-brand consumer vehicles more than doubled between 2022 and 2023. French, German and Italian mass-market brands appear to be especially vulnerable to competition. Analysts at UBS, a bank, reckon that “legacy” carmakers’ global market share will drop from 81% today to 58% by 2030.Europe’s leaders are particularly keen to develop green industries as they pour billions into the climate transition. Yet European companies producing for the mass market will struggle to compete with the value offered by their Chinese competitors. China already dominates wind turbines, for instance, with a market share of 60% in 2022, according to the Global Wind Energy Council, an industry body. That provides its manufacturers with the scale needed for further innovation. And things are only heading in one direction. China’s producer-price index, which measures prices at the factory gate, has been falling for 17 months, and is roughly at its level of 2019. The same index for the EU, even excluding energy costs, is almost a quarter above its level of four years ago.Europe’s own attempts to “de-risk” from China—that is, to source fewer critical inputs from the country and restrict investments and exports of high-tech goods to it—will also push up costs. In a recent paper Julian Hinz of Bielefeld University and co-authors look at the effects of a hard decoupling from China and its allies. For Germany, the European economy most closely intertwined with China, they find that a gradual adjustment would cost 1.2% of GDP, around the same as for Japan. Other major European countries and America would lose about 0.5% of GDP. China’s loss would come to around 2%.Europe’s de-risking costs would become harder to bear if Mr Trump wins in November. New levies are a grim prospect for the continent’s exporters, which last year sold €500bn of goods to America. Indeed, 20 of the EU’s 27 member states ran a goods-trade surplus with the country.Mr Trump stoked tensions during his first term, when America imposed hefty tariffs on aluminium and steel, hitting European producers. Europe replied with its own tariffs on American products, including bourbon and motorbikes. It took the arrival of Joe Biden for the two sides to reach a (somewhat shaky) truce. Trump 2.0 could be much more painful. The former president has proposed a 10% tariff on all America’s imports. Robert Lighthizer, who advises him on trade, has gone further, arguing recently that even more brutal tariffs might be “necessary”.Lighthizer’s heavy blowThe German Economic Institute, a think-tank, has calculated the possible impact. Imagine America applies 10% tariffs on its imports and punishes China with even higher tariffs. America’s own economy would take a hit, via higher consumer prices—but Europe’s would be hurt more. Germany’s total exports would be nearly 5% lower by 2028 than in a world with no new American tariffs. Private investment would also be hit. As a result German GDP would be 1.2% lower, equivalent to a cumulative loss of €120bn-worth of output by 2028. A Trump administration might go even further, seeking retaliation against Europe for its digital-services taxes, which target American tech firms, or for refusing to toe the president’s line on China.Meanwhile, when it comes to tensions between China and the EU, tit-for-tat probes into subsidies and dumping look likely to become common. The Chinese government, for example, has a clear idea who is behind the EU’s EV probe: it has started an anti-dumping probe into French cognac. France has designed its own ev subsidies for consumers to exclude Chinese brands; Chinese firms offer customers a rebate of the same magnitude, in what one analyst calls “a single-finger greeting to Mr Macron”.The combination of energy, China and Trump shocks could lead to an extended period of restructuring in the European economy. For the continent’s consumers, this would be a mixed blessing. Trade wars make goods pricier and reduce choice, but when China subsidises solar panels, European utilities and households get cheaper energy. Some regions could benefit, too. Countries such as Spain, with solar-power potential, or Sweden, with water and wind power, could attract new industries. Indeed, earlier this year H2 Green Steel, a Swedish firm, announced that it had secured €6.5bn in funding for its plant near Lulea in the country’s north.Similarly, some foreign firms will want to invest in Europe to be close to customers when trade is difficult. Poland attracted almost €30bn in foreign direct investment (fdi) in 2021 and 2022, and probably as much in 2023. That is twice the amount it typically received before the pandemic. FDI now makes up 25% of Poland’s capital spending, compared with an average of 5% or so in industrialised countries.Some of its inflows came from Bosch, a German engineering firm, and Daikin, a Japanese conglomerate, both of which are building heat-pump factories in the country. According to a survey by E&Y, a consultancy, 67% of “international decision-makers” expect their firm’s European presence to grow, up from 40% in 2021. That may include defence companies, which will supply the continent’s growing armed forces—and China’s EV makers.But most of the restructuring will be less pleasant. Continental, one of Germany’s largest suppliers of car parts, is shedding thousands of jobs. Bosch is getting rid of 1,200 positions in its automotive-software division. Others in the car industry have also announced cuts. The previous China shock spurred technological advances as workers moved to more productive companies that invested in innovation. But over the past 15 or so years, firms exposed to Chinese competition have shown signs of slower productivity growth, according to research by Klaus Friesenbichler of the Austrian Institute of Economic Research and co-authors.Although Germany is Europe’s manufacturing powerhouse, the triple challenge could affect the whole continent. Regions with energy-intensive industries or that produce mass-market products in western Europe stand to lose. Even areas insulated from the initial effects may see successful local firms invest more overseas, as they adapt to protectionism elsewhere. Over the next five years some 75% of large businesses in the euro area expect to diversify across countries, move production closer to sales or shift parts of their businesses to more politically aligned countries, according to a survey by the ECB.Old problemsThere are limits to what cash-strapped governments can do to ease the transition to new industries. This is especially true when they have promised to spend more on defence and there is little desire for the sort of grand EU reforms that could stimulate growth. The bloc recently approved €1.2bn in public subsidies for cloud computing by seven countries over several years. As McKinsey Global Institute, another think-tank, points out, that comes to about 4% of the annual investment of Amazon Web Services. Patents in frontier technologies are registered mostly by American and Chinese firms. Despite its huge population, in many respects the EU lacks scale. Internal goods trade is far from seamless. Services markets are as fragmented as ever.That leaves a second approach—seeking to preserve the old—for which lobbying is fierce. In an age when the populist right is resurgent, few politicians want to be blamed for job losses. Payoffs from doing the difficult, technical work of deepening capital markets or integrating electricity markets do not come quickly. In Brussels and Paris the clamour for unhelpful subsidies and other forms of protectionism is growing. Germany, meanwhile, is hamstrung by a three-party coalition that cannot agree on anything, let alone a thorny issue that cuts across geopolitics and industrial policy. As politicians prevaricate, more BYD ships will make the journey to Europe’s ports. ■ More

Minutes from the February meeting showed policymakers making the hawkish case for aggressive interest rate hikes to tame sky-high inflation, which came in at an annual 31.7% in February.
Nigeria’s naira currency plunged by around 70% against the U.S. dollar over the course of a year, hitting an all-time low of around 1,600 to the dollar in late February.

A pedestrian in the Lagos Island district of Lagos, Nigeria, on Monday, Nov. 14, 2022.
Bloomberg | Bloomberg | Getty Images

The Central Bank of Nigeria on Tuesday hiked its key interest rate by 200 basis points, as Africa’s largest economy looks to recover from a historic currency crisis and soaring inflation.
The CBN announced that its main monetary policy rate would rise to 24.75% from 22.75%, in its second consecutive hike after February’s 400 basis point increase.

Governor Olayemi Cardoso told a press conference that policymakers believed they need to continue tightening in order to tame runaway inflation, according to Reuters.
David Omojomolo, Africa economist at Capital Economics, said the latest move was “further evidence that officials are fighting aggressively to tackle the inflation problem and restore its damaged credibility,” despite being smaller than the previous increment.
“That may be a sign that some MPC members are concerned about the impact on growth from tighter monetary policy,” he suggested in a note on Tuesday.
“That said, the fact that officials delivered a larger-than-expected hike suggests that the fight against inflation, which stood at 31.7% y/y in February and is set to continue rising over the coming months, is taking precedence.”
Minutes published last week from the central bank’s February meeting had showed policymakers arguing the hawkish case for aggressive interest rate hikes to tame sky-high inflation, which came in at an annual 31.7% in February, up from 29.9% in January and the highest rate since April 1996.

Capital Economics expects further tightening, given Governor Cardoso’s need to bring down the curtain on the country’s inflation and currency crises.
“We have pencilled in further 100bp hikes at each of the next meetings in May and July before the hiking cycle is brought to a close. Policy will then probably be left on hold for the rest of the year,” he added.

Currency crisis

Nigeria’s naira currency has plunged by around 70% against the U.S. dollar over the course of a year, hitting an all-time low of around 1,600 naira to the dollar in late February.
However, it has since recovered some ground, trading around 1,400 naira as of Tuesday morning after the CBN announced that a $7 billion backlog of imports had finally been cleared.

IBADAN, Nigeria – Feb. 19, 2024: Demonstrators are seen at a protest against the hike in price and hard living conditions in Ibadan on February 19, 2024.
Samuel Alabi | Afp | Getty Images

The central bank’s February minutes revealed that members of the Monetary Policy Committee at the time held differing views on the drivers of inflation and naira weakness, which influenced their votes.
Though the MPC hiked rates by 400 basis points to 22.75% in February, there were arguments for hikes as small as 100 basis points and as large as 450 from committee members. Governor Cardoso had advocated for a 425 basis point move, Omojomolo noted ahead of Tuesday’s decision.
“Doves warned about the risk of hiking rates too aggressively and the structural nature of inflation, while hawks emphasised the need to restore the CBN’s credibility and move real interest rates into positive territory to further support the naira via extra foreign investment,” he added. More

Futures for May delivery were up 3.9% at $10,030 per metric ton, marking the first time the commodity breaks above the $10,000 mark.
Cocoa has been on a tear this year, soaring nearly 138%.

Workers collect dry cocoa beans in front of the store of a cocoa cooperative in the village of Hermankono on Nov. 14, 2023.
Sia Kambou | Afp | Getty Images

Cocoa hit a record Tuesday as supply constraints fuel prices higher.
Futures for May delivery were up 3.9% at $10,030 per metric ton, marking the first time the commodity breaks above the $10,000 mark. Cocoa has been on a tear this year, soaring nearly 138%.

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Huge gains for cocoa in 2024

Ivory Coast, the biggest coca producer in the world, is facing hotter-than-normal temperatures — which have led to dryer-than-usual conditions and crop yields. An outbreak of cacao swollen shoot virus has helped dent supply as well.
The move comes as chocolate demand in countries such as the U.S. remains strong.
Correction: Cocoa prices are up more than 100% this year. A previous version misstated the move. More

Alongside the company, two senior executives — U.S. citizen Tigran Gambaryan and British-Kenyan Nadeem Anjarwalla — were both charged and remanded in custody by Nigerian authorities.
Reports emerged over the weekend that Anjarwalla escaped on Friday from the Abuja guest house where the pair were detained.

The logo of cryptocurrency exchange Binance displayed on a smartphone with the word “cancelled” on a computer screen in the background.
Budrul Chukrut | SOPA Images | LightRocket via Getty Images

One of two Binance executives detained in Nigeria has escaped custody, while the Nigerian government has filed new tax evasion charges against the global cryptocurrency exchange.
Nigeria’s Federal Inland Revenue Service (FIRS) Monday announced that four new charges relating to tax evasion had been filed at the Federal High Court in Abuja, according to multiple local media reports.

Binance faces charges of alleged non-payment of Value-Added Tax (VAT) and company income tax, failure to submit tax returns and complicity in aiding customers to evade taxes through its platform, the reports said.
Alongside the company, two senior executives — U.S. citizen Tigran Gambaryan and British-Kenyan Nadeem Anjarwalla — were both charged and remanded in custody by Nigerian authorities.
Reports emerged over the weekend that Anjarwalla escaped on Friday from the Abuja guest house where the pair was detained.
“We were made aware that Nadeem is no longer in Nigerian custody. Our primary focus remains on the safety of our employees and we are working collaboratively with Nigerian authorities to quickly resolve this issue,” a Binance spokesperson told CNBC.
The country is in talks with Interpol to secure an international arrest warrant for Anjarwalla, Reuters reported, citing Nigeria’s national security adviser. The National Security Agency did not immediately respond to a CNBC request for comment.

The families of the two employees declined to comment at this time, but issued statements on March 20, following a hearing at which Nigerian authorities extended their detainment.
Anjarwalla’s wife, Elahe Anjarwalla, said she was “completely heartbroken” that he would not be home in time to celebrate their son’s first birthday.
“Nadeem has no authority to make high level decisions at Binance and I am once again asking from the bottom of my heart that the Nigerian authorities please allow him and Tigran to return home whilst they continue their discussions with Binance. I am also calling on the British and Kenyan governments to do more to get Nadeem back home to us,” she said.
Gambaryan’s wife Yuki said she did not know what to tell their two children about their father’s absence.
“Tigran is globally recognized for his work in law enforcement and many of his peers would say that Tigran’s continuous efforts are what keep crypto currencies safe and clean,” she said.
“Please let him come home to continue this good work. The longer that our husbands are away from our families, the harder it is becoming for us to go about our daily lives.”

A month in custody

Gambaryan and Anjarwalla were taken into custody in Nigeria on Feb. 26, although neither was charged at the time with any crimes. The Abuja government accused their employer of wreaking havoc on the country’s local currency.
The Nigerian naira is one of the worst-performing currencies in the world and has lost nearly 70% of its value to the U.S. dollar over the past year. Locals have flocked to cryptocurrencies in recent years to shelter their savings from the plunging currency and a soaring inflation rate that hit nearly 30% two months ago.
But Binance’s troubles in Nigeria appear to be less about a crypto crackdown and more of an attack on what Abuja sees as a bad actor in the space.

IBADAN, Nigeria – Feb. 19, 2024: Demonstrators are seen at a protest against the hike in price and hard living conditions in Ibadan on February 19, 2024.
Samuel Alabi | Afp | Getty Images

Nigeria has expressed two chief concerns with Binance — the fact that the government doesn’t know where money goes or how it moves through the exchange, and that the exchange was allegedly facilitating speculation on the price of the naira through its peer-to-peer marketplace.
The government alleged that Binance was laundering money and that $26 billion worth of untraceable funds had moved through the exchange.
Authorities in Abuja have also contended that traders using this P2P platform to trade the local currency for U.S. dollar-pegged stablecoins, like tether, were colluding on the price to maximize the exchange value. Binance has since shut down its peer-to-peer trading platform in Nigeria.
This is not the first time that Abuja has taken issue with Binance. In July 2023, Nigeria’s Securities and Exchange Commission put out a circular warning people against doing business with the exchange, noting that “any investing public dealing with this entity” was doing so at a “high level of risk” that “may result in total loss of investments.”
— CNBC’s Ruxandra Iordache contributed to this report. More

In 2023, the total deal value for the Asia Pacific region declined more than 23% to $147 billion from a year earlier, Bain & Company said in its report.
Japan though, was an outlier with deal value surging 183% in 2023 from a year earlier, making it the largest private equity market in Asia Pacific for the first time, according to the report.
Exits plunged 26% to $101 billion in 2023 from a year earlier — 40% of these exits were via initial public offerings, Bain said.

An editorial picture of the Japan flag set against an economic trend graph and images associated with the stock market, finance and digital technology.
Manassanant Pamai | Istock | Getty Images

The total value of private equity deals in Asia Pacific last year fell to its lowest since 2014 as fundraising dropped to a 10-year low amid slowing growth, high interest rates and volatile public markets, according to management consultancy Bain & Company.
Japan though, was an outlier, with deal value jumping 183% in 2023 from a year earlier, making it the largest private equity market in Asia Pacific for the first time, according to Bain’s 2024 Asia-Pacific Private Equity Report released Monday.

Japan is an attractive investment due to its deep pool of target companies with “significant pool for performance improvements” and corporate governance reform pressure on Japan Inc to dispose of non-core assets, Bain said.
Overall, deal value in the Asia-Pacific region declined more than 23% to $147 billion from a year earlier. This is also 35% below the 2018-2022 average value — a pace of decline that’s consistent with the global slowdown — and nearly 60% lower than the $359 billion peak in 2021, Bain said.
Exits plunged 26% to $101 billion in 2023 from a year ago — of which 40% were via initial public offerings. Greater China accounted for 89% of the IPO exit value in Asia Pacific, with a vast majority listing in Shanghai and Shenzhen. Excluding Greater China IPOs, the total Asia-Pacific exit value was $65 billion.

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“The outlook for exits in 2024 remains uncertain, but successful funds are not waiting for markets to bounce back. They are paving the way for sales that meet their target returns by using strategy reviews to highlight the potential value of deals to buyers,” Lachlan McMurdo, co-author of the firm’s annual report said in a statement.
“This approach can reduce the inventory of aging assets and return cash to limited partners through 2024, even if the overall exit market remains depressed,” he added.

Bain said many leading private equity funds have turned to exploring alternative asset classes, such as infrastructure operations with medium to high returns including renewable energy storage and data centers and airports.
Here are some highlights of the report:

Buyouts constituted 48% of total deal value in Asia Pacific last year, exceeding the value of ‘growth deals’ — involving companies that expand fast and often disrupt industries — for the first time since 2017.
Despite a declining pool of investors, Bain said private equity returns are still more attractive than those from the public markets on a five-, 10 and 20-year horizon.

The timing of a recovery still remains unclear, Bain said, even though there were signs of some improvements toward the end of last year. When the recovery does take effect, disruptive technologies such a generative artificial intelligence are among new areas that hold “great promise,” Bain added.
Japan, India and Southeast Asia, are among the Asia-Pacific markets being viewed favorably for private equity investment opportunities in the next 12 months, Bain said, citing Preqin’s 2023 investor survey. More

Every week, a new high. Little wonder a sense of unease is settling over markets. Some 40% of global fund managers think that artificial-intelligence (AI) stocks—a crucial driver of the rally—are already in a bubble, according to Bank of America’s latest monthly survey. Even Wall Street’s most starry-eyed pundits reckon America’s S&P 500 index of leading shares can eke out only minor gains in the remaining nine months of the year. For some, such nervousness portends a crash. But for everyone, it prompts a question: with stock prices having already risen so much, are there any left that offer good value?“Value” stocks are deeply unfashionable, and with good reason. They are defined as shares with prices that are low compared with their underlying assets or earnings (as opposed to “growth” stocks with prices that are high on these measures, yet which promise rapidly rising profits). If that sounds appealing, the returns of recent years have not been. Over the past decade value stocks have lagged behind the broader market and been left in the dust by their growth counterparts (see chart 1). In 2022, as interest rates rose and the prices of speculative assets took a savage beating, the pendulum briefly seemed to be swinging back. But only briefly: the current bull market has once again seen value stocks trounced by the rest.Chart: The EconomistThis losing streak has led many to declare value investing dead. Critics say it struggles to account for the intangible assets and research spending that underpin many of today’s most successful firms. Investing tools make it easy to filter companies based on price-to-value ratios, meaning that potential returns from this approach will probably be arbitraged away fast. The firms left looking cheap, in other words, are cheap for a reason.None of this, though, stops anyone from worrying that the valuations of the stocks leading today’s bull run have become too high to offer stellar future returns. A widely watched metric for this is the cyclically adjusted price-to-earnings (CAPE) ratio devised by Robert Shiller of Yale University, which divides prices by the past decade’s-worth of inflation-adjusted earnings. For America’s S&P 500 index, the CAPE has been higher than it is today only twice: at the peak of the dotcom bubble, and just before the crash of 2022. Even if a crash does not follow, a high CAPE ratio has historically proved to be a strong indicator that poor or even negative long-run real returns lie ahead. You hardly need to be a card-carrying value investor to take this as a cue to look elsewhere.For Victor Haghani of Elm Partners, a fund-management outfit, the response is obvious: look beyond America. In the wider world, valuations are lower (see chart 2). Mr Haghani calculates that, although American stocks attract a much higher aggregate price-to-earnings multiple than those elsewhere, around 40% of their underlying earnings come from overseas. In the rest of the world, some 20% of total earnings derive from America. Put another way, there is a strong degree of crossover in where the profits of the two groups of companies are actually made.Chart: The EconomistDespite this, the values the market assigns to earnings derived from America and elsewhere are wildly different. Mr Haghani’s number-crunching suggests that, to get from earnings to share prices (for both American and non-American stocks), investors are scaling up those coming from America by a factor of more than 40. For earnings coming from the rest of the world the equivalent scaling factor is just ten.This disparity seems to make little sense. It is one thing to suggest that American firms deserve a higher valuation because there is something exceptional about their growth potential. But why should earnings originating from America boost a share’s price so much more than those from elsewhere?Perhaps the stockmarkets of countries outside America (or, equivalently, the earnings coming from these countries) are simply underpriced in relative terms. This is just the sort of mispricing that markets may eventually correct by raising the valuations assigned for non-American firms, lowering those of American firms, or both. What is more, whereas value investing often involves taking concentrated bets on individual companies or sectors, betting on this repricing allows the risk to be spread across most of the world.In fact, even the argument that companies outside America merit their current low valuations because they lack dynamism is threadbare. It is frequently couched in terms of the sectoral composition of each market: America’s is brimming with the disruptive tech firms of tomorrow, while Europe’s, for example, is stuffed with stodgy banks and industrial outfits.But Hugh Gimber of JPMorgan Asset Management pours cold water on the idea that this explains the lower valuations of European firms. His team has split the continent’s companies by sector, analysed the historical multiples by which their earnings have been scaled up to generate their share prices, then compared these with the equivalent multiples for American firms. In most sectors, the European companies’ stocks have suffered from long-run average discounts. Today, though, these discounts are present in every sector—and are much deeper than their long-run averages (see chart 3). Rather than failing to operate in cutting-edge industries, such firms might simply be underpriced.Chart: The EconomistIt is not just in Europe that such potential value trades abound. Mr Gimber points to a range of emerging-market countries that are well placed to profit from global trends, and where valuations are nowhere near as eye-watering as those in America. Examples range from Mexico and Vietnam—benefiting from the “friendshoring” of Western supply chains—to other countries riding the AI wave, such as South Korea and Taiwan.Jens Foehrenbach of Man Group, an asset manager, notes that the Tokyo Stock Exchange has set an explicit target for firms to take actions that will raise their shares’ price-to-book ratios (the firm’s market value divided by its net assets) above 1. Some 42% of the constituents of Japan’s Topix index are yet to reach this, suggesting an obvious bet for those who think they will eventually.A unifying feature of all such markets is that—like any value investment—betting on them involves a leap of faith. The longer America’s stockmarket outperforms the rest, the more it seems like the natural way of things. Maybe companies listed elsewhere look cheaper because they are simply worse. But there are signs that the pricing differentials have grown too large for professional investors to continue tolerating. In March global fund managers told Bank of America’s survey that, month-on-month, they had rotated more of their equity allocations into European and emerging-market stocks than they had done for years. Any that are underpriced might not remain so for long. ■ More

A major exchange-traded fund provider is going deep on two popular plays: megacap tech and weight loss drug stocks.
In health care, Roundhill Investments is getting ready to launch a fund that focuses on the companies behind GLP-1 drugs. Dave Mazza, the firm’s chief strategy officer, expects to have more information on the fund’s debut in May.

“It’s going to be important to kind of keep an eye on this space,” Mazza told CNBC’s “ETF Edge” this week. “We’re going to see some rapid advancements in drugs. We’re already seeing rapid advancements of those leaders launching new drugs and new opportunities in the market.”
This wouldn’t be Roundhill’s first new product this year. The firm launched leveraged and inverse exchange-traded funds three weeks ago that track widely held tech stocks. They are the Roundhill Daily 2X Long Magnificent Seven ETF (MAGX) and the Roundhill Daily Inverse Magnificent Seven ETF (MAGQ).
MAGX is designed to profit from “Magnificent Seven” gains, which comprises Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla. Meanwhile, MAGQ gives investors a way to bet negatively on the group.
“These are tools that can be used for traders who have short-term views on the Magnificent Seven — both positive and negative to express that view,” said Mazza. “If you’re bullish, maybe look to that two-times amplified exposure with MAGX. Or, if you want to hedge your position or take an outright bearish view on a short-term basis, there’s MAGQ.”
Both funds reset their performances each day. So, they’re considered risky choices for investors, according to Mazza.

“You need to be able to view your positions on a daily basis. You can hold it for more than a day, but you need to be able to reassess: ‘Is this the right trade for me to be in?'” Mazza said. “They’re not intended to be held for longer time periods.”

‘You’re going to strike out a lot’

VettaFi’s Todd Rosenbluth cautions leveraged and inverse ETFs may not be suitable for every investor due to volatility.
“You really need to go in with your eyes open and understand that every day these could perform really well or really poorly,” the firm’s head of research said. “I like to think of leveraged and inverse ETFs as in playing baseball swinging for the fences. You’re going to hit a couple of home runs. You’re going to strike out a lot.”
Since their debuts on Feb. 29, the Roundhill Daily 2X Long Magnificent Seven ETF is up almost 7%, while the firm’s Daily Inverse Magnificent Seven ETF is down nearly 4%.
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The rate of divorce among Americans age 50 and older has doubled since the 1990s. It has tripled for adults over 65 years old.
So-called “gray divorce” puts women at high financial risk.
There are steps women can take now to protect themselves.

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Breaking up in old age can be costly, especially for women.
The rate of “gray divorce” — a term that describes divorce at age 50 and older — doubled from 1990 to 2019, according to a 2022 study published in The Journals of Gerontology. It tripled for adults over age 65.

In 1970, about 8% of Americans who divorced were age 50 and older. By 2019, that share had jumped to an “astounding” 36%, the study found.
About 1 in 10 people — 9% — who divorced in 2019 were at least 65 years old.
Meanwhile, rates of divorce have declined among younger adults, according to Susan Brown and I-Fen Lin, sociology professors at Bowling Green State University who authored the analysis.

The ‘chronic economic strain’ of gray divorce

In heterosexual relationships, gray divorce typically “has more negative implications for women than for men,” said Kamila Elliott, a certified financial planner and co-founder of Collective Wealth Partners, based in Atlanta.
Studies suggest women’s household income generally drops between 23% and 40% in the year after a divorce.

The economic effects are “less severe” for men, with some studies showing their income may even rise after a breakup, according to Laura Tach and Alicia Eads, sociology professors at Cornell University and the University of Toronto, respectively. The duo have co-authored several papers on the topic.

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Those financial disparities seem to be more muted for younger generations of women due to a greater likelihood of them working relative to older cohorts, experts said. Many older adults who divorce today adhered to the traditional notion of a man as a household’s sole breadwinner, they said.
“We’re seeing women in divorce today who are of the generation where they just didn’t work their entire life,” said Natalie Colley, a CFP based in New York and senior lead advisor at Francis Financial.
Women also tend to earn lower incomes than men due to a persistent wage gap; they tend to have less savings, and near-retirees who are divorcing don’t have much time to make up the difference. Divorced women can claim a Social Security benefit based on their own earnings or a former spouse’s earnings history, but the latter option is generally worth only up to half of an ex’s benefit.

Remarrying or cohabitating generally helps bolster one’s finances via pooling of resources. But women who undergo gray divorce are less likely to do so than men: Only 22% of women re-partnered in the decade after gray divorce versus 37% of men, putting them at “sustained economic disadvantage into old age,” according to a separate paper by Brown and Lin.
Altogether, women’s standard of living declined by 45% following a gray divorce, while the drop for men was less severe, at 21%, Brown and Lin wrote.
These negative economic outcomes persisted over time, “indicating that gray divorce operates as a chronic economic strain,” they said.
Poverty levels among women old enough to qualify for Social Security retirement benefits are almost twice as high for women who divorced after age 50 as those who divorced before age 50, Brown and Lin found; the same isn’t true for men.

How women can protect themselves financially

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Here are some steps women can take to protect against the financial pitfalls of a potential future divorce, according to financial advisors.
Get active in your household finances. “Women should take a very active role in their household finances,” said Elliott, a member of CNBC’s Advisor Council.
Women shouldn’t get to a point where they’re unaware of their household’s spending, savings, and mortgage payments and interest rates, for example, she said. Such information could come as a surprise upon divorce, and women may learn they’re not financially well-protected.
Additionally, being unengaged from financial decision-making may mean they’re ill-equipped to handle their own finances if they become single, Colley said.
“I can’t tell you how many times I’ve met couples where the woman had no idea what the husband was doing financially,” Elliott said.
Have access to your own money. Many couples commingle their financial accounts. Many women may also be authorized users of credit cards instead of primary owners, Elliott said.
But women should ensure they have access to their own funds so their spouse can’t shut off the financial spigot if a relationship sours, Elliott said.

Additionally, women should consider investing or saving in their own retirement account, she added.
Retirement savers generally need earned income to open and contribute to an individual retirement account; however, women who don’t work can open a “spousal IRA” based on their spouse’s income. (You must be married and file a joint tax return to open one.)
Be strategic about claiming Social Security. Social Security is an important source of guaranteed income in retirement, especially for women.
The sequence of claiming benefits can be important for married couples and can help women hedge against divorce (or widowhood) later, Colley said.
For example, let’s say a husband is eligible for a larger Social Security benefit relative to his female spouse. He can defer claiming benefits to age 70, thereby maximizing his lifetime monthly benefit.
That increases the monthly benefit his wife could receive upon divorce or widowhood, and helps maximize a woman’s cash flow in such circumstances, Colley said.
Save some alimony. If a woman receives alimony after a divorce, she should aim to save some of it, instead of spending it all, Elliott said. That’s because alimony generally only lasts for a certain period — and women must make it last, she said.

I can’t tell you how many times I’ve met couples where the woman had no idea what the husband was doing financially.

Kamila Elliott
certified financial planner and co-founder of Collective Wealth Partners

“Just because you get alimony, it’s not business as usual” relative to spending levels, she said. “You probably need to reassess your lifestyle.”
Consider a prenuptial or postnuptial agreement. Couples can also consider a prenuptial agreement or postnuptial agreement that contains provisions to protect a woman financially if she leaves the workforce to care for their children, for example, Colley said.
Doing so generally permanently dents the caregiver’s earning power, and a legal agreement can help insulate against that financial risk, she added. For example, perhaps it stipulates the woman gets a guaranteed stream of income for a certain number of years if the marriage dissolves, Colley said. She recommends working with an attorney who specializes in such legal documents. More