The Old Age is over, and its welcome to the new, which is going to be little different – just a lot more complex. Thriving in a confused new economy of energy scarcity, inflation, recession and geopolitical threat isn’t easy – as the UK is about to discover.
The UK’s finances depend on how long energy security remains compromised, and whether the new Truss government can convince markets to fund that time.
The UK is at risk of breaking its “Virtuous Sovereign Trinity” of stable politics, currency and bond markets. Collapsing confidence in politics to stem the slide in sterling and thus Gilts, could see the UK stumble into a crippling Sovereign Financial crisis sooner than we think possible.
As summer wends towards its end, a winter of populist discontent from left and right will make Europe increasingly fraxious. While the US economy will likely be on path to recovery – Europe will still be trending down.
Not an insightful Porridge this morning, but let me tell you a story about lessons learnt on holiday and what’s likely to dominate the news flow in August ahead of the September market!
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.
Big theme for the week in UK politics will be the last act in The Tragedy of Boris Johnson. His likely denouement coincides with rising economic stress, increasing corporate defaults and doubts on sterling. Time to Panic? Not at all! Bring it on.. We’ve suffered worse!
Dead Cat Bounce or a renewed upside trend? The range of opinions and views on where markets are headed is diverse and confused – will bonds and stocks recover, or will energy, food and inflation shocks further destabilise sentiment. These are dangerous times, but fools will always rush in.
Populism is a massive threat to markets. Inflation, tax-hikes, petrol costs, poverty, political mismanagement and a host of other failings could further destabilise the West, while markets seem determined to stay euphoric whatever the evidence to the contrary.
Boris whipped the Tory faithful into a frenzy with his “wizard” economic plans, but it was empty, hollow and doomed bluster full of soundbites and repeating policy mistakes like austerity and higher taxes. It’s time for Government to get radical and retro-build the economy from top to bottom – all of which is imminently possible if they learn the lessons of the pandemic.