- Data reveals “mind-blowing” potential for BRICS economies to outperform the United States
- Global investors buy record $21 billion worth of Chinese stocks in opening weeks of 2023
- Analyst says dominance of western countries like the US, the UK and Australia ‘slipping away‘
- Precious metals and Indian stocks tipped to boom amid ‘changing world order‘
The United States will become significantly poorer as it faces a major financial challenge from the China-led BRICS alliance, according to a veteran market analyst.
Francis Hunt, whose macro analysis has previously featured in Bloomberg, says BRICS nations (Brazil, Russia, India, China and South Africa) have enormous potential for growth compared to the western world and has released data to back up his thesis.
“Future western generations are going to be physically poorer on the global scale of relative wealth,” Hunt said.
“We are talking about the secular decline of the west – particularly America.”
Boom time for BRICS?
In recent years, BRICS economies have largely been ignored by investors, who’ve been fearful of issues like the war in Ukraine and the Chinese government’s regulatory crackdown on tech companies.
This even led to some describing China as “uninvestable”.
However, since the start of 2023, there’s been a notable shift in sentiment that has seen global investors scoop up a record $21 billion worth of Chinese equities.
Hunt believes this rally is only just beginning and the table below tells us why.
The total market capitalization of the United States stock market is $40 trillion, which is supported by a population of 336 million people. That’s a ratio of $119,000 worth of market cap for every citizen.
The BRICS nations, on the other hand, have a combined $15.4 trillion market cap for their stock markets, but their total population is 3.2 billion. That gives BRICS a ratio of just $4,736 per head of population.
“The BRICS alliance has 10 times the population and less than half the market cap, where do you want to invest?” Hunt asks.
“I consider these figures absolutely mind-blowing.”
But, of course, it’s not as simple as comparing those numbers.
The US does, after all, have the world’s largest and most successful companies, including the likes of Apple, Microsoft, Meta and Tesla.
But Hunt doubts America’s current market cap to population ratio can be sustained and believes it won’t be long before BRICS nations, some of which are known for their tech capabilities, start to create their own giant companies.
The rise of India
Hunt has singled out India as a country on the cusp of significant economic power.
But if you compare its current stock market capitalization ratio with that of the US like we did with BRICS, the result is even more eyebrow raising.
“India is a country with lots of programmers, lots of very smart people, but it has a relatively tiny ration of $2,000 per head of population,” Hunt said.
“You’re telling me there isn’t going to be a Microsoft or a couple of companies like that to come out of India?
“They’ve got the smarts. They have vast numbers of people who speak English.
“If you’re asking me to invest for the next 20 years in an index of Indian tech or American tech, I’m going with India.
“Yes, there’s corruption, but are you telling me there’s no corruption in America?”
The pending collapse of the United States?
When you look at current value of its stock market and the momentum of companies like Apple, it is hard to suggest the United States is anything but a powerhouse.
But Hunt believes we will start to see the acceleration of the country’s demise and even predicts the western world will fall into depression as early as this year.
“I’ve been putting forward this thesis for a long time, you’re actually going to see a levelling out of the wealth effect,” Hunt said.
“Whether the American economy dies entirely or just loses a lot of value is another question, but the dominance is definitely going to slip away.
“America’s domestic market is ageing and nobody wants debt anymore because interest rates are climbing, debt is going down in value and there’s a very strong inflationary environment.
“Everything is undermined.”
According to Hunt, most investors in the west are not prepared for such a situation because they’re invested in the wrong assets.
Precious metals buying frenzy
Global central bank gold reserves are at their second highest level since 1950. Let that sink in.
And it appears the countries that are rushing out to buy the precious metal are the likes of China, Russia and India.
Officially, China owns 2,010 tonnes of gold, but it’s widely thought that both the Chinese and Russian Governments are hiding much more than they’re telling the rest of the world.
“China doesn’t do full disclosure,” says Hunt.
“There will be large, unreported purchases. Also, nobody knows how much they’re actually producing themselves.
“So it wouldn’t surprise me if they announced they have 50,000 tonnes and Russia says it has 15,000 tonnes and you’re suddenly sitting here with two countries alone that have 65,000 tonnes.”
Hunt also points out that the people of India have long had an obsession with gold and the country likely holds much more than we know.
“If gold gets revalued upwards significantly one of the biggest climbers in wealth will be those who intrinsically culturally are naturally big gold holders anyway – and that’s India.
“Gold is being pursued by those who know the game – traditional assets are coming back in favor.”
America headed for debt disaster?
The United States is not believed to be buying up as much gold as the BRICS countries.
“America has financialized everything. It’s all about flipping apartments and condos, getting mortgages and buying cars,” Hunt says.
“Everyone’s in banking. Everyone’s doing investment banking, retail banking and insurance. These industries are going to contract.”
The same could be said for other western countries including the United Kingdom, Australia and New Zealand, who Hunt says have “thrown their lot in with the Americans”.
“When it comes to investing, you should be a fairweather friend. You should be migrating into the value propositions. “
Essentially, Hunt says countries need to decide where they position themselves in what he says is the likely event of a financial war.
“Currently many are backing the current boss instead of the future boss,” Hunt said.
A new world order?
Francis Hunt believes the banning of Russia from the SWIFT payments network was an example of why BRICS countries will be planning new financial instruments that replace those currently in existence.
He says this could well include a SWIFT replacement and new central bank digital currencies (CBDCs), that could be backed by gold.
“I think China will drop the true value of their gold holdings like a bomb when they launch their CBDC so that people go ‘wow’ that’s where the gold is – yeah I’ll have their token.
“Instead of your local currency and the dollar being king, you will have local CBDCs and you will have regional agreements like the BRICS nations.”
Hunt says this will lead to America losing the monopoly of the dollar based-pricing for commodities.
“People will be able to buy oil in yuan, rubles, rupees or perhaps a new BRICS currency.”
“Prepare for a breakout of options in terms of money systems.”
This article reflects the personal views of Francis Hunt and is offered as information only. To read more from Hunt, you can visit his website or YouTube channel.
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