Doom and Gloom dominates the economic mood. Analysts are predicting just how bad it will be next year – but easy money was the drug that fuelled the financial excesses of the 2010s, the market is still addicted to it, and the current dire sentiment is cold turkey..
There is a long list of contenders for financial idiot of the year. Who will win?
Jerome Powell signalled a slow-down in interest rate hikes – and markets loved it. But did he just make a long-term mistake by not decisively signalling the end of the era of monetary and market distortion? There are lessons to be learnt, not least being the role of inflation in a buoyant economy.
How will free-market economies resolve crashing discretionary spending, wage inflation and looming recession when income inequality is so blindingly obvious to electorates? Something has to change.
After some tumultuous weeks in global markets, where do we go from here in terms of the dollar, inflation, energy, China? It’s all terribly complex, but probably good news for some and bad for others. The UK is likely on the loser list.
Last week saw a succession of fundamental shifts in how the global economy is working: inflation, China’s reopening, western politics, crypto, Climate Change, Tech stocks, and in Ukraine. These all have significant potential market implications.
US Mid-Terms will dominate the news this week. Gridlocked US politics might be good in terms of zero legislative surprises, but polarisation will punish stocks and diminish the US over the long-term.
Halloween is a great time to be scared about markets. They are inconsistent, confused and uncertain, but the reality is even rising interest rates, inflation and trade wars sort themselves out - eventually. The real danger is how much worse bad politics and make a scary situation absolutely frightful.
In Bonds There is Truth – but until Real bond yields turn positive they remain financially repressive. If Central Banks “pivot” from tightening rates to address inflation too early, markets will remain fundamentally distorted.
Well, that was a fun week… but the UK’s travails are the tip of the iceberg of market pain facing the global economy. More political, geopolitical, liquidity and leverage driven crises are coming as markets reverse out the QE era. Don’t Panic!
