The history of the 1929 and 2000 downturns suggests the real pain is yet to come. Housing markets look terribly over-valued around the world, as I noted last month. And US consumer sentiment is at all-time lows. So most company earnings seem set to fall, with more than 60% of US CEOs now expecting to see a recession.
Central banks and investors believed stimulus programs had created a “New Paradigm” where asset prices would always increase. Now they are starting to realise that stimulus is irrelevant against the 3 Horsemen of the Apocalypse – China’s continuing battle with the pandemic, Russia’s invasion of Ukraine, and potential famine as rising gas/fertilizer prices mean farmers can’t afford to grow their crops or feed their animals.
The seeming genius of many private equity funds in recent years has been based on this ability to borrow at cheap rates during the ‘up’ part of the business cycle. Now we are heading into the ‘down’ cycle. And the central banks have abandoned Bernanke Theory and are back to worrying about inflation. So today’s excess leverage means many over-leveraged companies will go bust.
Problems in the housing market aren’t just confined to the US, UK, Germany and China. The average house price/income ratio is now back to the highest level since records began. And the problem for homeowners is that potential buyers are already starting to disappear as mortgage rates rise – and affordability reduces.
The blog has now been running for 14 years since the first post was written from Thailand at the end of June 2007. And quite a lot has happened since then: There was the 2008 financial crisis, one of the …
My Dutch colleague, Daniël de Blocq van Scheltinga, is a graduate of Leiden University in the Netherlands, with a Master of Law degree and a specialty in International law. Here he gives his expert view on the Dutch court’s decision to order Shell to reduce its CO2 emissions by at least 45% , relative to
Rising interest rates will continue weighing on equities. Since 2009, the Fed has focused on financial markets, hoping to impact jobs and growth.
Markets are starting to realise you can’t have a V-shaped recovery without rising inflation and bond yields
Our move to become “cautiously bearish” on the S&P 500 proved prescient.
Markets are starting to realise that Biden’s focus is on improving the lives of working and middle-class Americans, not new S&P records.
Hedge funds have been happily selling the US dollar and buying commodities for some time, creating the illusion that a strong economic rebound is underway.
An insurrection in the US capital, the formal election of the next President interrupted, and 5 people (including a law enforcement officer) dying in armed clashes. But as happens in financial bubbles, the markets sailed on untroubled.
Investors have been spoilt in recent years by the absence of risk. 2020 confirmed the ‘risk off’ mode as central banks ramped up their support. But will Wall Street continue in party mood, despite the growing problems on Main Street?
“Fundamental reality will start to dawn, as it always does, in the end”
“The rationale behind today’s euphoria seems based more on illusion than reality”
” Investors expect $trns more stimulus from Janet Yellen & Jay Powell”
“Everyone hopes that the new vaccines will prove effective. But we doubt there will be a quick return to ‘business as usual’.
“Bliss was it in that dawn to be alive, But to be young was very heaven!” But this early excitement is unlikely to last once pandemic reality returns to the headlines
There are 10 weeks till the Biden Presidency is due to start. But Donald Trump has refused to concede the race, and Senate control is still in doubt.
It seems likely that Joe Biden will win Tuesday’s Presidential election. We look at the potential impact on financial markets.
50 million Americans have already voted in the Presidential election. Turnout is on course to be the highest percentage since 1908. This week we analyse President Trump’s agenda if he is re-elected. Next week, we will look at Joe Biden’s alternative for the country.
Supply/demand balances are weakening in oil markets, whilst a Fed Governor has highlighted the serious problem that developed in Treasury markets during the March collapse. We also focus on the economic impact of the Perennials – who will provide the majority of US/Western and Global population growth over the next decade.
Many indicators are now pointing towards a global downturn in the economy, along with paradigm shifts in demand patterns. CEOs need to urgently build resilient business models to survive and prosper in this New Normal world, as I discuss in my 2019 …
China is now developing a used car market for the first time in its history. This means the end of global auto sales growth, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog China’s car market has been key to the recovery in global auto sales growth since […]
Western central bankers are convinced reflation and economic growth are finally underway as a result of their $14tn stimulus programmes. But the best leading indicator for the global economy – capacity utilisation (CU%) in the global chemical industry – is saying they are wrong. The CU% has an 88% correlation with actual GDP growth, far […]