Markets are at an inflection point: bonds are more attractive, but credit risks rise in a deflationary bust? Or should higher oil prices remind us what triggered inflation, and raise the risk of consequential Stagflation!
Phillips Curve economics calls for higher unemployment to calm inflation. Great plan says The Bank and Chancellor while consigning millions of UK citizens to penury. We need something better than wrecking lives and the economy.
The debt ceiling crisis has lifted a cloud from markets, but we’re still looking for resolution on inflation, geopolitics and a host of other issues. Maybe the real issues are about valuations – which remain over-extraordinary.
Markets are focused on the immediate debt-ceiling crisis, and the short-term game of guessing rates vs inflation. Down the line are the bigger challenges of the medium and long-term: issues we need to be investing in now to garner long-run returns or just to survive!
What does £5.40 a coffee tell us about the economy? That inflation is sticky. Do we face a stagflationary bust or a reflationary boom? Either will mean Central Banks have failed. At the heart of today’s economy are a succession of issues to resolve – not least is the need for a reset on corporate behaviours to drive stable growth.
As Janet Yellen warns of default risk, and Jay Powell hikes rates, the risks to the global economy are mounting: a deflationary bust, or stagflation? Market confidence in the face of a deepening credit crunch is falling.
The Fed tries to be dovish to calm market fears, but banking fears and inflationary threats on the economy may lead us somewhere new: A Stagflationary Bust!
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.
Elections are a wonderful way to unravel the risks of political incompetency by letting the people, rather than politicians, decide. Meanwhile, the collapse of another thing in Crypto comes as no surprise. If it did, consider a career change.
There are lessons from the public humiliation of Kwasi Kwarteng for governments and corporates around the globe. If we are going to address the looming economic crises – then governments, central banks and financial instutions need to be on the same page.