Why do we worry so much about debt, the dollar, inflation and growth, when the only really, really important things are Energy, Food and Commodities and how we pay for and get them?
Inflation is the market’s theme today. Markets expect it, but are they prepared? Inflation doesn’t necessarily spell disaster, but it will force change in the way we think about markets – and Tech will likely be the sector that feels it most!
Forget everything you think you know about inflation. It is not solely a consequence of “monetary phenomena”, but largely about the behaviour of crowds. That’s why it’s so dangerous to growth and markets.
Market expectations are all over the place as participants factor in what a new Fed appointment might mean in terms of lower for longer rates and more accommodative policy – but it all feels increasingly hollow. Momentum is not infinite!
The G7 agreement is being hailed as a great step forward, but will it ever happen? Janet Yellen’s call for higher rates is a clear sign the problem of financial asset inflation will finally be addressed – the question is how painful the treatment and taper tantrum will be? Not addressing financial asset inflation is a far bigger risk than the debt crisis many monetary traditionalists perceive has grown from government pandemic spending.
