Jerome Powell signalled a slow-down in interest rate hikes – and markets loved it. But did he just make a long-term mistake by not decisively signalling the end of the era of monetary and market distortion? There are lessons to be learnt, not least being the role of inflation in a buoyant economy.
As we approach US Thanksgiving – the start of holiday markets, the markets seem convinced we’re back on an upward path, but the reality is the new economic and inflationary cycle may only just have begun..
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.
In Bonds There is Truth – but until Real bond yields turn positive they remain financially repressive. If Central Banks “pivot” from tightening rates to address inflation too early, markets will remain fundamentally distorted.
Global Markets have nosedived – the UK’s confidence crisis is one trigger alongside rising recession risks, crashing consumer spending and host of indications we ain’t near done on higher interest rates as inflation becomes embedded into economies and dollar strength continues unabated.
There is nothing like a dead cat bounce to cheer up the already doomed, but the real issues are inflation and dollar strength. Both can be addressed, and the treatment will hurt. Smile and get used to it.
Central banks, inflation and recession are the visible risks, but what if we are looking at all the wrong things?
Everyone is balancing inflation, economic numbers and this week’s Jackson Hole Central Bank smooze-a-thon to guess markets. What if we are looking at the wrong things – and economic divergence, income and wealth inequality and unravelling domestic politics are the critical factors?
Blain’s Morning Porridge – July 13th 2022: How long and deep is Inflation, and how close is China to a…
Inflation will dominate the headlines while the US earnings season kicks off. The prospects for stocks on the back of falling numbers and crashing consumer sentiment bode ill for recovery, and strongly suggest there is further market downside to come in Q3.
Harry Hindsight is the world’s greatest market trader – he’s circling round the opportunities presented by inflation and the risks its presents. He’s short bonds, credit, stocks, Brexit and the UK.