Markets are being whipsawed by rate hike threats from Central Banks, China lockdowns, the Ukraine war, while being stalked by inflation and stagflation. The big risk remains policy mistakes – trying to solve these with the wrong monetary and fiscal policies.
Why do we worry so much about debt, the dollar, inflation and growth, when the only really, really important things are Energy, Food and Commodities and how we pay for and get them?
Markets are nervous and set to tumble – spooked by $140 oil, soaring commodities, rising populism on inflation, and stagflationary risks. Some ask: “perhaps this could all be avoided by settling with Putin?” Forget the past at your peril. Appeasement is not the answer. Intimidation stops when you fight back. Now is the time for the west to step up the pressure.
It’s going to be a testing week for markets as a whole slew of negatives, challenges and no-see-ums threaten to overturn everything. It couldn’t look worse… unless of course you remember my key market mantra (read on), and that the sun usually comes up tomorrow. Happy Valentines..
“The future may dimly be perceived through the veil of the past”, sounds like bad poetry, but has a point. The confusions and conflabulations that characterised 2021 will likely set the tone for what’s coming – what were the key themes of 2021? Best to understand them before trying to fathom what comes next.
Everyone loves a conspiracy theory, but what if the stories Covid escaped from a China virus lab take hold? We will never know the truth, but as the rumours multiply, they could trigger renewed trade-war. It could unravel China’s regional hegemony and trigger a dramatic reversal for the global economy -especially for China.
The world looks poised on the edge of a synchronous recovery on pandemic recovery, climate-change, renewables and infrastructure investments. It will fuel a massive commodities supercycle, but is not without danger in terms of currency confidence and debt risks. A key proxy will be copper – which could rally strongly, yet still looks cheap in dollar terms. However, the growing sense of fractured political polarisation and gridlock in the US suggests substantial dollar depreciation.
Forget fears of rising interest rates - the big threat is how the global economy will cope with supply chain bottlenecks and the coming commodities supercycle. These will create all kinds of friction. The West is particularly vulnerable to microchip supply instability – which could take years to resolve.