The world is a complex place, and the massive macro threat posed by Ukraine is a clear danger to markets. Less clear, but just as significant, is economic failure at the micro level as firms start to fail as banks pull back, and the sheer injustice of what happened to UK Postmasters. The elites will protect their own - not a single manager will go to jail despite their appalling treatment of post office staff.
Markets are great at reacting to a single stimulus but are like a frog in a pan of warming water when it comes to consequential events. Forget “Black Swans” or “no-see-ums”, but figure out how the increasingly complex picture of unfolding events and consequences are driving markets!
Occasionally the Morning Porridge strikes a lucky insight on markets – this morning here are some thoughts on how 2022 markets and events may or may not develop. If they occur I shall hail myself an investment genius. If not, can we quietly forget them?
Markets are up and down, and the noise is focused on Covid, Central Banks, Inflation and Tech stocks. But… perhaps the big risks lie elsewhere. Where are Geopolitics headed? Faceoffs in Ukraine and Taiwan have the potential to completely derail markets.
Let me present a list of things to worry about next year. Inflation, US and China growth, Stagflation, Central Banks, Stocks, Climate and Equality, etc, etc.. But the big risks will be the consequences of US Politics and a Liquidity Meltdown in the Credit Markets.
China’s markets are under pressure from the widening Chinese Communist Party’s regulatory crackdown – which is likely as much about imposing party discipline and control as much as it was ever about consumer protection. But as investors fret about crashing China stocks, rising global uncertainty and the destabilisation caused by the Afghan debacle, the Chinese are likely to up the pressure and further test a distracted US administration. “Interesting times” lie ahead for global markets as the tension threatens to escalate.
