We need to be aware of the consequences of political failure and populism. What’s happening in the Middle East is a warning of how politics go wrong. We should pay close attention.
The threat list to global markets lengthens, but the Truth will be found in the bond markets. Like inflation and rising rates, the effects of a bond market slide are lagging – It’s going to take other financial assets time to catch up on the bond crash!
Events in Israel have been shocking. Its deliberate – Iran fermenting conflict to support its goal of Arab hegemony. It puts Saudi in an impossible position – and could move it closer to Russia and thus higher oil prices. Interesting times indeed. Hard Hats close.
The Tough Times will pass - how do you then create an economy that balances Growth and Prosperity, Politics and Justice, the Environment and Business, Wealth and Equality. Could it be as simple as setting the right interest rate?
The markets are panicking about bond yields. There is little to panic about. Higher rates will normalise the economy – but the commentariat loves to make a problem into a crisis. Y’day the BBC got it badly wrong, confusing the cost of new debt with debt service costs.
Who are we trying to fool? Rising bond yields, higher for longer rates, recession fears, crashing consumption, yet stocks believing earnings could still push them higher? Are we at risk of a realisation moment and a repeat of 1987 or maybe something worse?
Normal Morning Porridge will resume later this week. I’ve been taking a short-break travelling round Portugal, and it’s an extraordinary place. The possibilities and opportunities confirm it's far too easy to simply dismiss Europe’s periphery as irrelevant.
The Bank and The Fed have served notice they will remain vigilant – higher for longer! Markets would be wrong to expect early easing. Wage Inflation and Energy remain very real threats over the medium term – it may trigger volatility as markets understand the new reality.
