Consumption and a cost-of-living crisis are upon us, but markets blithely assume it’s all upside to 2023. The risk is not a massive crash, but growing realisation the global economy has peaked, needs a period of normalisation and a reset after the madness of the last decade.
Readers of a sensitive nature may wish to take a chill pill before reading this morning’s Porridge comment. Remember, the sun will come up tomorrow. The market might not.
Lockdowns and travel restrictions highlight the economic damage Omicron has done to the whole European Economy. Corporate resilience will be severely tested – whatever governments decide. The likelihood of stagflation has risen, but markets are likely to benefit from buy-the-dip mentality as investors weigh-up renewed government support if/when it turns nasty!
The Omicron Variant dominates the headlines, but will likely prove a short-term market factor. No doubt a renewed round of panicked responses, lockdowns, travel bans and Christmas threats will occur, but markets should take these in their stride – the biggest risk is margin calls triggering something deeper.
The weather on the Pacific Northwest has turned ugly, as might the financial weather if the current degree of market complacency proves unfounded!
