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!
The big story in the market has been the humbling of Indian conglomerate Adani. Who could have guessed? But the real issue isn’t that a company may have fooled the market over its value, but that the market never worked out how improbable the valuations were. Time to check up on risk management!
Markets have a habit of getting over-excited. They get FOMO and become over hasty. Although the outlook is improving, there is certainly little to justify some of the more speculative hype dominating market moves. Time a bit of rational thinking and common sense – consider Tesla as an example of misplaced hopes.
Gosh… The Rest of the World wonders how the UK has suddenly become a corruption-raddled third world kleptocracy. The optics are terrible. Even the Russians are moving out! Fortunately, there may be a solution: let’s be British about it, and show everyone we can do political knavery better than anyone else!
Around the globe everyone thinks inflation is beaten. It may well be, but the consequences will persist. Interest rates may not “pivot” the way market optimists hope, with profound implications for equities and bonds. We are into a new market cycle of normalised rates and corporate fundamentals. All-in-all, that’s a good thing for growth!
Consumption and a cost-of-living crisis are upon us, but markets blithely assume it’s all upside to 2023. The risk is not a massive crash, but growing realisation the global economy has peaked, needs a period of normalisation and a reset after the madness of the last decade.
Global Markets have started 2022 on a stronger footing than many feared – the issue may be too much focus on short-term positives while long-term embedded problems remain unaddressed. Even the outlook for the UK may be improving – and a change in politics will allow the fundamental rot at the core of the economy to be cauterised.
Markets are slumbering down for the next 10 days. Time to relax – if you can. It’s been an “interesting” year – and it’s going to remain that way going forward. Lots to worry about, but lots of opportunities to seek out!
Christmas is coming, but plenty still to think about in terms of markets; from the lessons on Covid re-opening in China, what Tesla’s shareprice tells about the resurgence of common sense, and the prospects of 2 years of dither into the very necessary general election the UK needs to move forward!
I’ve no idea what might happen in 2023, but I don’t think its going to be as bad as some expect, but neither will it be as rewarding as others predict. Its likely to be another year of trading on what the mood is, what the numbers mean, and hoping to call it right. Hope, as they say, is only a strategy when you simply don’t know!
