The S&P 500 hit a record high on Friday, despite multiple conflicts, global tensions, a new round of supply chain shocks, US central bankers cautioning on slower than expected pace of easing, the ongoing recession risks, the dearth of consumer disposable spending, and corporates wondering how to delever. Never mind… it all makes sense apparently….

The reality is the market is trading the Mid-2020s market like 2008 has just happened, and that low interest rates are the normal. Nope. Low interest rates were a 14 year distortion – and their effects are still apparent accross twisted economic systems. They still need to be resolved.

There are great companies out there. They are going to produce superb long-term profits to reward shareholders as the global economy recovers and strengthens in the medium-long-term. The US will likely avoid a short-middle term recession, but the question is: are these great companies really worth what the market is paying for them today (discounting them against the expectation of ultra-low rates) or what they are actually worth in terms of long-term 3-4% rates?

Normalisation of interest rates will be great for the global economy – but the market still thinks Central Banks will revert to ZIRP mode. They won’t.