What we learned at Davos: The economy is a mess, but there’s still hope
By Nicole Goodkind, CNN
Friday marks the end of the annual World Economic Forum meeting in Davos, Switzerland, an elite gathering of some of the wealthiest people and world leaders.
The glitzy retreat into the Swiss Alps looks increasingly out of date as the biggest war in Europe since 1945 deepens splits in the world economy. But that doesn’t mean it’s not important.
The meetings between CEOs, politicians, and global figures at Davos can help set the tone for the year ahead. Here are some of the key talking points from this week.
It’s a mess: The big stories coming out of Davos this year are full of phrases like “fragmenting global economy,” “economic uncertainty” and “the year of inflation.”
While many executives and economists are now striking a more optimistic tone, global leaders are still fretting about the economic outlook. That’s not surprising since they’re contending with worrisome uncertainties — Russia’s war in Ukraine is still raging, inflation and interest rates remain elevated, there are looming energy and food crises, supply chain kinks and the debt limit standoff in the United States, not to mention the threat of global recession.
The meeting began with a new report by the WEF that dubbed this decade the “turbulent 20s” and the “age of the polycrisis.” Business executives, politicians and academics, the report said, are bracing for a gloomy world battered by intersecting crises, as rising volatility and depleted resilience boost the odds of painful simultaneous shocks.
Gita Gopinath, the number two official at the International Monetary Fund, said in an interview with the Wall Street Journal that the IMF is worried globalization is in retreat. “We’re very concerned about geoeconomic fragmentation,” she said. The issue had come up a lot in meetings with member countries at the conference, she added.
CEOs and political officials are also worried about the United States hitting its borrowing cap on Thursday, forcing the Treasury Department to start taking “extraordinary measures” to keep the government open.
If an agreement isn’t reached, markets could plunge (like they did the last time this happened in 2011) and the United States risks having its credit rating downgraded again. The situation is a “mess,” said Peter Orszag, CEO of financial advisory at Lazard.
JP Morgan CEO Jamie Dimon told CNBC from Davos on Thursday that the reputation of the United States as creditworthy is “sacrosanct.” To even question it, he said, is the wrong thing to do. “That is just a part of the financial structure of the world. This is not something you should be playing games with at all.”
But it may not be that bad: Many leaders’ economic forecasts actually struck a semi-positive tone, even as they factored in strong headwinds.
So far, energy supplies have held up in Europe, and the US and China are engaging in diplomatic relations — Treasury Secretary Janet Yellen and Chinese Vice Premier Liu He met in Zurich on Wednesday.
China’s removal of strict coronavirus restrictions late last year is also expected to unleash a wave of spending that may offset economic weakness in the United States and Europe.
Climate change was a hot topic: The rich and powerful do love to flock to Davos in their carbon-emitting private jets to discuss climate change. But this year, severe warnings were issued to global leaders.
The UN Secretary General accused fossil fuel producers and their financial backers of “racing to expand production, knowing full well that their business model is inconsistent with human survival.”
Speaking at Davos on Wednesday, António Guterres said the commitment to limit global warming to 1.5 degrees above pre-industrial levels is “going up in smoke.”
“We are flirting with climate disaster. Every week brings a new climate horror story,” he said.
Swedish activist Greta Thunberg also made her way to Switzerland and delivered a “cease and desist letter” to fossil fuel CEOs — signed by more than 800,000 people.
The AI revolution is here: Some CEOs at Davos admitted that they’re using the revolutionary new AI bot, ChatGPT, to do their work for them, reports my colleague Julia Horowitz.
Jeff Maggioncalda, the CEO of online learning provider Coursera, said that he uses the tool to bang out emails.
“I use it as a writing assistant and as a thought partner,” Maggioncalda told CNN from Davos.
Christian Lanng, CEO of digital supply chain platform Tradeshift, said he uses the ChatGPT to write emails and claims no one has noticed the difference. He even had it perform some accounting work, a service for which Tradeshift currently employs an expensive professional services firm.
“I see these technologies acting as a copilot, helping people do more with less,” Microsoft CEO Satya Nadella told an audience in Davos this week.
Bad news is bad news again on Wall Street
There’s a saying on Wall Street that bad news for the economy is actually good news for the stock market and vice versa, reports my colleague Paul R. La Monica.
That’s because investors often bet that dismal headlines will eventually prompt the Federal Reserve and other central banks to cut interest rates and provide more stimulus that can help boost corporate profits…and stock prices.
But the debt ceiling debate in Washington is changing all of that.
Wednesday’s big market sell-off and the continued slide Thursday might represent a turning point for market sentiment. Still, after a promising start to the year, stocks have seemingly taken a turn for the worse. Bad news actually might be bad news.
“We’ve been snuggled up in expectations of a soft landing for the US economy,” said Kit Juckes, chief global foreign exchange strategist at Societe Generale, in a report Thursday. “Take away the blanket and it feels chilly.”
Netflix founder Reed Hastings stepping down as co-CEO
Netflix announced Thursday that its founder Reed Hastings is stepping down as co-CEO at the company and will serve as executive chairman. Hastings will be replaced by co-CEOs Ted Sarandos and Greg Peters, reports my colleague Clare Duffy.
Under Hastings’ leadership, Netflix disrupted legacy movie rental companies like Blockbuster and helped shake up Hollywood by kicking off an arms race investing in original content.
Last year, however, Netflix saw its stock and reputation take a hit after losing subscribers amid heightened competition from rival streaming services. In response, Netflix introduced a lower-priced, ad-supported tier for the first time in its history.
Those changes may be paying off. In its earnings report on Thursday, the streamer said it added more than 7.6 million subscribers during the final three months of last year, well above the 4.5 million additions it had projected, for a total of more than 230 million paying subscribers worldwide.
“Reed Hastings stepping down from his current role raises a lot of questions about Netflix’s future strategy,” Jamie Lumbley, analyst at investment firm Third Bridge, said in a statement. “While the subscriber growth numbers are encouraging, revenue growth is sluggish with the backdrop of a potential recession looming on everyone’s mind.”
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