What You Can Expect from the G20 Meeting

For an event that lasts just two days, the G20 meeting in Japan this week requires a lot of planning. Especially for the host country.

The main summit is in Osaka — Japan’s second city, but don’t tell them that. Plus, there are another eight meetings in separate cities across the country.

From Kutchan, in the northern island of Hokkaido, through to Fukuoka in the south. Two cities (and islands) nearly 2,000km apart.

Surprisingly, though, Tokyo didn’t get a look in. Maybe next time, I guess.

Just as surprising is another little known fact. This is the first time that powerhouse Japan will host a G20 meeting, since it officially formed 20 years ago. Only in recent years did China overtake Japan to boast the world’s second largest economy.

Joining the hosts will be the 18 other countries and the European Union, that combine to form the group of 20.

The G20, however, didn’t always enjoy such a high profile. Its origins trace back to the ‘Library Group’, named after the location of its meeting place inside the White House in 1973.

Back then, it was a much smaller group. The US, UK, Germany and France were its only members. Two years later it became the G6, when Japan and Italy joined.

As time has passed, the group has continued to expand. Now, of course, the G20 is a much bigger deal. It is the most important forum for the global economy.

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How the G20 meeting works

But while the focus is on the 20 members, there are other groups that attend its meetings. Central banks, like the ECB, are a central part of discussions.

And while not a member (by its own choice), Spain is a permanent invitee. Plus, there are hordes of other international groups, as well.

These range from the WTO (World Trade Organization), to the United Nations, the World Bank and APEC (Asia-Pacific Economic Cooperation).

ASEAN (Association of Southeast Asian Nations) and the AU (African Union) are also on the permanent invitee list.

Plus, there are another swathe of what the G20 refer to as ‘engagement’ groups. If you can believe it, there are the B20, C20, L20, T20 and Y20 — a veritable jungle of acronyms.

All up, in addition to the world leaders and other dignitaries, thousands of staff and other hangers-on will be packing for Japan as we speak.

As the host nation, Japan not only gets to set the agenda for the meeting. Because the G20 does not have its own secretariat, the host nation holds its position (and sets the agenda) for a year. It rotates through the member groups, based on their region. Next year, Saudi Arabia will have its turn.

There are no prizes, though, for guessing what will be on the agenda at this year’s meeting. The global economy for one thing. Though, that is always the basis for any of the talks.

What could happen if talks go south

The real focus will be on two men — Donald Trump and Xi Jinping. All discussions will lead back to the same topic.

That is, the on-again, off-again US–China trade war. More specifically, the tariffs that define it.

For these two leaders, the politics is perhaps more important than the economics. Both have to feed their domestic political agenda. That is, about which country (and leader) can dominate the other in the coming decades.

The other thing they both know, is that their counterpart has a pretty tough head. Neither of them will want to be seen to be backing down. Other countries will have little say — their only goal is to avoid the crossfire as much as possible.

It is easy to talk such meetings up. Rarely, though, do they match the hype. Although, a lot is riding on this one.

This meeting comes at a particularly key time for both leaders. China’s leadership has emphatically decided to expand its global footprint. Not just economically, but strategically as well.

All this is happening as growth in its economy slows. Plus, its stock market, unlike the US, is still a long way — around 50% — below its all-time peak.

Yet for the US, it too is an important time. US companies continue to print growing profits. A slowing global economy (and tariffs), however, could pop that momentum.

Plus, the Fed and interest rates are never far away. The US President has not been shy about pressuring the Fed to cut rates.

Only recently, the Federal Reserve changed its wording around its monetary policy. Rather than increasing rates — as has been their policy for some years — the next move could be down. There could be a number of moves after that.

If the talks between Xi and Trump go well, we can expect a nice little bounce in the market.

However, if the talks go south, we might not only see a correction in the markets, but global (particularly US) interest rates may also fall. For Australia, that could mean a further cut.

While that might take some pressure off mortgage holders, it also comes with some associated pain.

For term deposit holders, they will have to rely on even less income. Meaning that less money is available to prop up consumption, and by extension, the domestic economy.

All the best,

Matt Hibbard,
Editor, Options Trader

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Matt Hibbard is Money Morning’s income specialist. With nearly three decades in the markets, Matt has traded just about every asset class there is. The one thing that has stuck with him over this time is a very simple premise. That is, it’s the cash a company generates that ultimately determines its value. Sure, some stocks might fly away to multi-digit gains. But unless these companies can convert the ‘story’ into real money, the market will eventually find them out. And when that happens, the share price quickly falls back to Earth. Matt is also the editor of Options Trader, where he shows subscribers how to use basic options strategies to generate income. This is income they can generate on top of regular dividend payments. Matt doesn’t play the prediction game, where the aim is to be proven ‘right’. Instead, his goal is to generate as much income as he can for his subscribers, irrespective of whether the market is going up or down.


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