Markets have entirely recovered after their wobble earlier this week, but it’s based on a simple belief: central banks will stand behind markets. Investors are increasingly convinced inflation threats are irrelevant – and they are wrong to do so. Inflation risks are growing from immediate climate change, the costs of rising environmental instability and inflation leaching out of financial assets into the real economy.
Markets are fretting. Up one day and down the next? Do they believe in the dire fundamentals or inflation threat, or keep buying Central Banks juicing the markets? Never mind; hot disruptive tech stocks can only ever go up… But where do they eventually lead us? I suspect Tech will eventually kill us all…
Its “Freedom Day” in the UK, but it feels same as, same as. Bond markets look stressed, but freak weather is raising the probability government intervention dwarfing the scale of the pandemic may become necessary. There will not be a gradual, ordered progression to a new higher temperature climate. Instead… the reality looks like high-cost chaotic freak-weather events becoming increasingly common. The cost could hit trillions.
The media is full of China noise – does the rising tension mean it may become un-investible? The Chinese economy is very different, but recognisably similar. Investment into China boils down to how effectively a capitalist economy can succeed in the face of government diktat, bureaucracy, and intervention – and on that basis it’s a proceed with caution market.
What Inflation? “Oh, that’s nothing to worry about, the central banks have no choice but to keep juicing markets”… The market is so focused on the short-term and ignoring the consequences of the last 10 years of QE, monetary experimentation and easy rates, that its blundering into the next crisis. Inflation matters, and has jumped from financial assets into the real economy.
As Freedom Day in the UK approaches, just what are the risks? Rising infections, and more virulent and dangerous mutated variants could still put a kybosh on reopening. Are we doomed to a repeating cycle of lockdowns? And what could that mean for markets? Probably another opportunity..
The football is finished. Get over it. There is much more positive stuff to follow! The UK has many issues to overcome, but we are a nation generally comfortable with ourselves, secure in our future and full of promise. This is the time to be investing in UK Inc – not writing us off because England dropped ball in the penalty lottery, again!
