Decoding Davos: unravelling the mysteries of Davos

19 January 2017

WEF Davos is where the world’s decision-makers gather once a year to discuss the future of systems shaping our world and society across everything from economics to energy, finances to food security, health to housing and investment to infrastructure and much more.

1. Don’t stop thinking about tomorrow….

When influential people from across the globe come together to discuss the state of the world’s political, economic and other systems then you know it’s January and time for the World Economic Forum’s annual meeting. The meeting takes place in a town in Switzerland, that for the most part of the 20th century was better renowned for the attractiveness of its ski slopes, and in the 19th century better renowned for the sanatoriums built their because its clean air was thought to hold the cure for tuberculosis (TB).

The wife of Sherlock Holmes author, Sir Arthur Conan Doyle, came to Davos to be treated when she contracted TB but today Davos is where the world’s decision-makers gather once a year to discuss the future of systems shaping our world and society across everything from economics to energy, finances to food security, health to housing and investment to infrastructure and much more.

But one doesn’t require the sleuthing skills of Sherlock Holmes to unravel what Davos, as the gathering is colloquially referred to, is all about although perhaps an ear for the lyrics of a couple of popular songs over the last few decades would help. For those growing up in the eighties then Davos’ theme song could be Fleetwood Mac’s Don’t Stop Thinking about Tomorrow or for those of a later generation perhaps even Michael Jackson’s Heal the World. And now I can hear you humming along to the words of the chorus; ‘make the world a better place’.

One could say, and not be far wrong, that Davos is intended to be about making the world a better place for all who live in it. But it is also fair to say that this narrative is more under threat at this 47th event than it has been at any time in the recent past; and not without good reason. The rich are getting richer and the poor are getting poorer leading to increasing discontent – both in developed economies and emerging market economies.

2. But should any of us be bothered about Davos though?

From an investment perspective the flurry of activity, over the 4 days that Davos takes place, lends itself to many quotable quotes from people in a position to influence policy and systems.

Coming as it does so early in the New Year, when arguably many of us are in a mood of self-reflection, perhaps comments coming out of Davos land on more fertile ground than may otherwise be the case? This year, Davos follows hot on the heels of Brexit and clashes with the inauguration of Donald Trump, so there is likely to be even more scrutiny of what’s being said at Davos as we all search for clues about how some of the world’s more influential economies, the US, Europe and the UK, may be impacted by these unexpected events.

So comments coming out of Davos can provide investors with clues about to the future direction of travel on many issues that could impact the global economy and hence the price of financial assets such as shares and bonds as well as the sustainability of other emerging investment opportunities such as renewable energy.

• So, when, for example, CNBC Africa’s Brownwyn Nielsen hosts a panel featuring the well-known Nigerian businessman Aliko Dangote to discuss Powering Africa, perhaps we will find some clues about the continent’s commitment to green energy programmes which South Africa could play a leading role provided we maintain our own commitment to a green and sustainable future.


• Or when Power FM’s Zamatungwa Khumalo features on a panel to discuss Africa’s Road to Prosperity with Jacob Zuma and Paul Kgame, Presidents of South Africa and Rwanda respectively, perhaps she will be able to press for further clues about what priority our leaders will place on good governance as part of the solution to some of Africa’s challenges?

Will President Zuma continue with the unifying message delivered on January at the ANC’s 105th birthday celebrations or will we see a return to his stance during his December address to the ANCYL in KZN where he struck a decidedly more confrontational tone criticising ANC veterans and questioning whether he would get the support of his own party members in future Cabinet reshuffles. Again, vital clues emerge as to the tone we can expect during 2017 and hence how investment markets linked to South Africa will behave during the year – notably the value of our Rand as well as South Africa’s cost of borrowing money to fund the many social and infrastructure development projects on the government’s agenda.

Comments coming out of Davos can provide investors with clues about to the future direction of travel on many issues that could impact the global economy and hence the price of financial assets such as shares and bonds as well as the sustainability of other emerging investment opportunities such as renewable energy.

3. Same old, same old…

Investors value certainty and stability – many long-term investment decisions are made on the basis that policies favourable to making that investment remain in place until the investor has reaped a sufficient reward on that investment.

For example, the decision by foreigners to continue investing in building solar powered plants in South Africa will be influenced by government policies towards such investment. The more certain and favourable that policy is, the more capital is likely to flow towards that investment. As more capital is attracted to these investments, South Africa is in a more favourable position to choose those investors offering to invest on terms that are more favourable to us and the South African electricity consumer, who ultimately bears the cost of electricity generation. Fewer investors means fewer choice and sources of capital which will increase the cost of implementing our development programmes.

In fact when it comes to government policies that favour investors, then the saying ’same old, same old’ can be music to the ears of many long-term investors.

We live in an increasingly uncertain and volatile world; a world in which US President-elect, Donald Trump, can influence investment decisions through Twitter. In such a fast moving environment, a tweet in the middle of the night has the potential to have a greater impact on the value of stock markets than 4 days of intense discussions at Davos.

However, investors are constantly looking for signs that threaten their current investment assumptions; signs as to how future policies may change and impact the value of their investments. The agenda at Davos is designed to be jam-packed with discussions on precisely these policies and by those in a position to influence those policies. But those shifts are likely to occur over a much longer time frame; measured in years not months and certainly not the minutes or hours following a tweet.

Warren Buffet famously noted that the stock market is a device for transferring money from the impatient to the patient – perhaps that is the lesson here – whilst the clues we glean from Davos may not have the same immediate impact on financial markets as a 140 character tweet from Donald Trump, they can nevertheless provide us with important signals about the future shape of policies that will impact the value of investments both here in South Africa and around the world.

Read more on knowmore.ashburtoninvestments.com