Markets wobbled yesterday on the current litany of fear: interest rates, inflation and Ukraine. The bigger issues are just how unsustainable current equity valuations remain, and where to invest in range-bound markets.
Pull your buying boots on, lace them up tight and get ready to buy the UK! Even the possibility Boris and the ERG snatch defeat from the jaws of common sense won’t change the narrative: A deal with EU will happen, putting the UK back on some sort of course.
The market is talking about a no-landing scenario – but should be watching what Central Banks are saying, and China’s position re Ukraine. The market remains vulnerable to recession and rising geopolitical tensions. They are very closely linked.
Nicola Sturgeon’s resignation as Scotland’s First Minister has triggered fervid speculation about votes going to Labour – another nail in Tory hopes of electoral recovery. Things seldom play out as expected – the Scots are a troublesome lot!
Inflation across the West looks to be more entrenched than markets believed – Higher for Longer. Maybe it’s time to accept it’s going to take time to fix, and look elsewhere for returns.
It’s time to stop kidding ourselves. Brexit promised much but has been a disaster. The economy is contracting, investment in growth has collapsed, and there are no signs of Brexit bonuses. Time for a reset.
It’s a big week for inflation data, but markets have caught a dose of common sense as the reality of higher for longer interest rates settles in. The question of why the market believes overly frothy narratives is fascinating – understanding why is critical to bet against them.
As traders rationalise what Central Bankers say about higher for longer rates, its time to reflect on just why markets and the real economy seem out of line and disconnected. The real issue is about how to reconnect growth and consumption, and that has implications for wages!
