< Previous20 Vol. 23/06, June 2022 mean that If there isn’t a recession, then the bottom in the market isn’t too far away. Why do you believe the extent of the global economic recovery is being underestimated? To put it simply, the global economic recovery is highly uncertain; impossible to predict and therefore neither over nor understated. Even if Covid-19 returns to plague us (which sadly it appears to be doing in some parts of the world), in the vast majority of countries, authorities won’t lock down like they did before. While the global economy will continue to normalise from the aftermath of the pandemic, and there is plenty of catch up to be done. The Federal Reserve issued the biggest rate hike in 22 years. What is your view on how it will impact fi nancial markets? How will this help in taming infl ation? It’s true that at 50 basis points, it was the biggest hike by the Federal Reserve in 22 years. But, because the fed funds rate was already extremely low (an all-time low), even a 50 basis u Situation The global economic recovery is highly uncertain; impossible to predict and therefore neither over nor understated, says Matthews Financial markets: Is the road to recovery in sight? Mark Matthews, head of Research Asia at Swiss Wealth Manager Julius Baer, discusses global economic recovery, the oil market, sustainable investments and more SPO TLIGHT/ JULIUS BAER Markets are on a roller- coaster ride. Where do you see this heading? We anticipate that this roller- coaster ride is likely to continue, and by the end of the summer, indices will be lower than where they are now. Although the S&P is still down a bit less than 20 percent from its peak – so not officially the technical definition of a bear market – hardly anyone thinks it won’t fall below 20 percent from its peak sometime soon. The NASDAQ Composite, which represents the technology stocks, led the market on the way up over the past decade. It is already down almost 30 percent from its peak. The key aspect is if the economy will experience a recession, or not. In the eight bear markets since World War II that weren’t accompanied by recessions, the average decline in the S&P was 24 percent. But in the nine-year markets over the same period of time that were accompanied by recessions, the average decline was a much larger 35 percent. Simplistically that should 3.2% The projected global economic growth this year, according to the World Bankarabianbusiness.com 21 / JULIUS BAER Q IN THE CURRENT ENVIRONMENT, MAKE SURE YOU HAVE CASH FOR A DIP, AND DON’T HAVE ANY LEVERAGE” 10% The average total annual return of 500 large companies listed on stock exchanges in the US over the past three decades point rate hike only takes the fed funds rate back to 1 percent, which is less than half its average of the last three decades. That being said, Fed officials have been busy communicating their aggressive tight- ening plans since 21 December, and that communication has already moved the market to reprice the 10-year treasury yield from 0.5 percent to around 3 percent. This is helping tame some aspects of inflation, because treasury rates are the benchmark for most commercial and mortgage loans in the United States. But for other things in the basket, like food and transportation, higher rates will be less impactful. Which companies do you believe offer the best investment prospects? Share prices of large technology companies have underperformed the broader market this year, because they were considerably more expensive than the broader market when it peaked. They were also (and still are) the largest constituents of the bench- mark equity indices that Exchange Traded Funds (ETFs) replicate. So as investors became concerned about the Fed raising rates and the war in Ukraine, they sold those ETFs, and the large technology company share prices fell more. However, having fallen in price so much, we find that on several key valuation metrics, those large technology companies are no more expensive than the broader market today. They still have significantly above-av- erage growth profiles, because the global economy continues to digitalise. Then, although inflation will come down from its currently high level, it won’t go all the way back to what it was pre-Covid. It will prob- ably be around twice of what it was before. Also, with carbon emission targets to reduce global warming, investment in fossil fuel extraction will be low to nil. Ironically, that should keep oil and coal prices at levels where it is very profitable for producers to extract them. With inflation correcting lower over time, this is an attractive entry point that we will seek to exploit in our portfolios. Moreover, inflation should start to roll over as the commodity supply-chain bottleneck effects from the pandemic and the war in Ukraine start to fade. Julius Baer Research does not expect a commodity super cycle, and there is no general phys- ical shortage of commodities. The oil market has undergone a lot of fl uctuation recently. Do you see this continuing? There is plenty of oil around, the issue is getting it, and shipping it. For example, the United Kingdom could be self-sufficient in its energy needs, but as it has clamped down on production in the North Sea, it is far from self-sufficient. Meanwhile and ironically, oil from formerly objectionable producers like Venezuela is now acceptable. It is a confusing and illogical picture, that means prices continue to fluctuate. Longer-term, as passenger cars transition from combus- tion engine to electric motors, a quarter of demand for oil will slowly disappear. Technologies should emerge to replace combustion engines used in other applica- tions too. So on a 10-year view, the oil price should be much lower than it is today. Sustainable investments are grow- ing in traction. Do you see this as a passing phase? For sure ESG investing is here to stay. The danger is if it becomes excessively bureau- cratic, to the extent that it is uneconom- ical. That would not work, because by definition; investing is an activity done to produce a positive return. Also, for emerging countries, it is very difficult to shift quickly to fossil fuel-free transpor- tation and electricity. I am hopeful there will be a happy medium where we can become more caring of the environment and generate a profit at the same time. Finally, what is your advice to investors in such a tumultuous market environment. Would you recommend to stay invested? Yes, but there is no long-term gain without short-term pain. The S&P 500 has aver- aged a 10 percent total annual return over the past three decades. And yet along the way, there were two bear markets of more than 50 percent, and another two of more than 20 percent. So buying and holding the S&P is the way to go. It is like a very good fund manager – it naturally pushed the best companies to the top, and the worst companies out. Finally, I would add that in the current environment, make sure you have cash for a dip, and don’t have any leverage. 22 Vol. 23/06, June 2022 FEATURE / TECHNOLOGY BY LAUREN HOLTMEIER Experts say decentralisation of the metaverse might be one way to reduce potential adverse mental health outcomes Mental health in the metaverse: Experts raise concerns over anxiety, depression FEATURE / arabianbusiness.com 23 / TECHNOLOGY The rise of the metaverse has stirred concern over what effect the new technology will have on mental health with studies already linking too much screen time and long stretches of scrolling on Instagram and TikTok to heightened levels of anxiety and depression. Technology, largely social media, has been blamed for increased polarisation – politically and personally. With insults slung across social media platforms, it seems easy to say it has diminished empathy. While society was grappling with one set of adverse effects brought by one technology, the pandemic brought a new concern – Zoom fatigue. It seems normal that the rise of virtual worlds and the metaverse would spur concern over what effect another new technology will have on our mental health. “Imagine the pressure of having to exist in two different dimensions and trying to align your emotional, psychological and cognitive abilities in both dimensions, despite the fact that they possibly require different skill sets and focus,” says Dr Joseph Khoury, chief of psychiatry and behavioural health at American Hospital Dubai. “It will add anxiety definitely. The younger generation will probably find [the metaverse] more natural, but for older people, it will be tricky.” On the other side, some virtual reality (VR) proponents say the new tech can teach empathy and improve mental health. By putting on goggles, an individual can be dropped into the middle of a rural village in some far-off remote village, or assume a different persona, giving them an understanding of what it’s like to be a person of a different race or gender. In conversation, tech terms, like social media, VR, and the metaverse, get jumbled. Ultimately, people are spending more time online, and it stands to impact how we see the world, how we interact with others, and our mental health. It’s easy to assume the effect one has on something, like mental health, will prove true across the board. But VR and metaverse developers are asking for a chance to prove the new tech won’t be as damaging. “The concept of the metaverse is still in its early stages. What potential side effects of this new technology [may appear] is still under speculation and observation,” says Kirck Allen, CEO, of metaverse aggregator Kaloscope. Allen says overall, “The metaverse will have positive effects on improving mental health as it’s designed to be like a game. Ninety-one percent of the population today are already participating in the metaverse simply by using smartphones, laptops or wearables so in the next few years $4bn The contribution of the metaverse sector to Dubai’s economy by 2030 HUGE POTENTIAL Current estimates expect business revenues from the metaverse could grow from $180bn to $400bn by 202524 Vol. 23/06, June 2022 FEATURE / TECHNOLOGY u Effects Technology, largely social media, has been blamed for increased polarisation – politically and personally there will be many products and services that will focus on immersive experience which can reinforce positive effects in a persons’ mood and cognitive functions.” He also distinguishes between social media and the metaverse. “The biggest issue, though with social media platforms is due to their centralised nature, large corporations could potentially manipulate their platforms’ algorithm to increase engagement- by showcasing unhealthy content to its users,” he says. Social media has been widely linked to anxiety and depression in teenagers, especially girls, but at least one 2021 study, titled Association Between Social Media Use and Self-reported Symptoms of Depression in US Adults, has found those same issues appear in adults who spend time of social platforms. There is no causal link between social media use and depression, but there is certainly a correlation between the rise of social media and the rise in adults who report feeling stressed or depressed. “We believe that Web3.0 decentralised platforms could be the future, as it allows the community to help regulate content within the platform, instead of a large corporation A NEW WORLD Meta has invested heavily in virtual and augmented reality to refl ect its new approach on the metaversearabianbusiness.com 25 / TECHNOLOGY 80% The percentage of consumers surveyed in the UAE who said that they are spending substantially more time online, according to Accenture’s Technology Vision 2022 report manipulating communities to merely increase engagement,” he says. He, alongside Simon Hudson from Cheeze, agrees that developers need to seriously consider the potential mental health effects new platforms could have and that developers do have a role to play in mitigating negative effects. “The developer communities are usually very strong, and I think we are all recognising the impact that endless hours in front of a machine can have. When building products, taking these concerns into consideration will definitely help mental health when using the products,” Hudson, the CEO of NFT photo company Cheeze, explains. Allen is optimistic that the decentralised nature of the platforms will translate to a better ability to mitigate the effect on people’s minds. “The top priority of any metaverse company should be the way it cultivates its community as there will be a support system available for those who suffer from mental health issues. Many companies normally start on the singular user experience expanding from that. By cultivating a healthy community within your project, companies will get direct feedback from their consumers on how to improve their platform, support individuals who are struggling,( which will increase engagement and by creating achievement based rewards) and will get people to positively participate more on their platform,” says Allen. Allen wants to see the metaverse run as a “community led project rather than run and controlled by a single entity, and by doing so, should create mitigation on the so-called adverse effects on mental health as it was built by the people, and for the people, and not for a single entity or individual.” When Facebook, now called Meta, came under fire for its products that were said to fuel hate and harm mental health, whistle blower Frances Haugen said the company chose “profit over safety.” Can new tech metaverse platforms, where there is also little regulation, navigate this battle for balance any better than the social media giants? “Personally, I feel that if done correctly virtual worlds and online products can help individuals. Although there have been many cases of people suffering with mental health, there are also just as many positive examples of how new online communities and virtual meetups have helped individuals come out of depression and directed life into a better place,” Hudson says. u Specialists (From left to right) Simon Hudson and Dr Joseph Khoury u Awareness Technology can teach empathy and improve mental health The Arabian Business UAE Forum this year will be a two-day forum, on June 28 and 29, which dives into the future of technology, but importantly, the future of work and mental health in the workplace. To learn more about the event scan the QR code. Q THE TOP PRIORITY OF ANY METAVERSE COMPANY SHOULD BE THE WAY IT CULTIVATES ITS COMMUNITY” arabianbusiness. com/events/mental- health-and-the- future-work-two- day-arabian- business-event-to- unpack-key-issues- for-industry26 Vol. 23/06, June 2022 FEATURE / RECRUITMENT Initiative increases the country’s ability to attract and retain talent amidst regional competition UAE introduces landmark unemployment scheme BY NABILA RAHAL The latest in a string of initiatives set to make the country a more attractive place to live, the UAE announced in May a landmark unemployment scheme. For the first time in the country’s history, both expats and Emiratis who lose their job will be eligible to receive 60 percent of their basic salary each month, or up to AED20,000, for a yet undisclosed limited time period. “The unemployment insurance system aims to enhance the competitiveness of the labour market, provide a social umbrella for its workers, and establish a stable work environment for all,” Dubai Ruler Sheikh Mohammed bin Rashid said in a post on Twitter the day the scheme was announced. Going into effect on January 23, 2023, the unemployment insurance programme will offer each UAE resident the option to pay a minimum of AED40 and a maximum of AED100 per year into an insurance scheme. The Department of Human Resources and Emiratisation has said it will be developing a mechanism to create and operate the scheme, its application and subscription fees, and any necessary requirements or procedures to ensure its success and governance.arabianbusiness.com 27 / ENTREPRENEURSHIP28 Vol. 23/06, June 2022 FEATURE / RECRUITMENT Positive impacts The move has been hailed by industry leaders across several sectors as another positive step towards attracting and retaining talent in the UAE, strengthening the economy further as regional competition for talent heats up. “This programme is another huge step for employment stability and employee rights in the UAE,” Marize Coetzer, a senior associate at global law firm Reed Smith, says. “It complements the recent changes to the UAE Labour Law and the introduction of new visa categories, which encourages people to join the UAE workforce and to remain here after their employment ends. “A large portion of the UAE expatriate workforce still live from hand to mouth. This unemployment insurance will give employees comfort even if their employment is unexpectedly terminated. They would not have to immediately relocate and leave the country due to lack of income, or be forced to incur debt to survive,” she continues. The unemployment benefits are also likely to give people breathing space to find a job. “Currently, employees need to have a job to move to if they are unhappy in their current role, whereas the new reforms reduce this dependency. This new policy should give SAFETY NET In the event that UAE workers lose their jobs, they will be eligible to receive 60 percent of their basic salary each month u Stimulating growth The UAE’s initiatives will create a more stable economy and will result in a less transient labour poolarabianbusiness.com 29 / RECRUITMENT Q THERE IS ALREADY COMPETITION FOR TALENT AS THE ECONOMY RECOVERS STRONGLY FROM COVID” employees more confidence, as well as security,” explains Scott Livermore, the ICAEW economic advisor, and chief economist and managing director at Oxford Economics Middle East. “The reforms highlight that factors beyond wages are important for attracting talent. During the recovery phase, this is likely to become more intense. This places the onus on businesses to be ‘good’ places to work in a broader sense. “The new initiative will likely encourage expats to relocate to the UAE, and will also likely see public sector employees migrate to the private sector. This creates a more self-sufficient labour system and encourages greater confidence about developing a career in the UAE,” he continues. This will also be beneficial for employers as it may serve as a way to attract employees to join, or incentivise employees to stay at, their company. “There is already competition for talent as the economy recovers strongly from Covid. If these reforms increase the attractiveness of the private sector in the UAE to both local and expat talent, then this could be positive for business and the economy as a whole. “The new initiative will create a more stable economy, with a less transient labour pool, and will therefore help retain and develop knowledge in the economy, which should be positive for long run growth.” Livermore adds. Startups reap scheme’s benefi ts The unemployment scheme will benefit the startup ecosystem by widening the country’s existing talent pool. Although many startup employees are still working remotely, blue-collars workers in the ecosystem will have “breathing room” to remain in the UAE while looking for another job, explains Sallyann Della Casa, founder of Gleac.com. “Most tech startups in the region and globally are still operating on a remote work talent model. Our workforces are sitting everywhere and as such the Unemployment Initiative has little impact on our population. I am also not sure if this law by itself attracts that “remote” startup workforce to the region or widens our white- collar pool of talent,” saysDella Casa. “I think the true net beneficiary of this law are the most vulnerable levels of the workforce from developing countries already here in more blue- collar roles within startups. Take for example the drivers of Deliveroo or Talabat. They would benefit immensely from this law. It will give them the breathing room to stay in the region to bridge to their next job. It’s a basic humanitarian move and a good for business,” she continues. u Insights (From top to bottom) Sallyann Della Casa, Scott Livermore, Marize Coetzer, Ramesh Jagannathan, Joanna Matthews-Taylor $425bn The size of the UAE’s Gross Domestic Product (GDP) in 2022, according to projections by data analysts Trading Economics 4.3% The UAE’s projected economic growth this year, according to a report from Swiss banking leader UBS 3.5m Dubai’s population as of June 4, 2022, according to fi gures from Dubai Statistics Centre’s live population counter Next >