The bulls are back in charge of markets, as investors dream of a happy ending to the seismic dislocation following the global pandemic. Yet, for those willing to look beyond the headline economic data, a more uncertain outlook emerges. In the US, the disconnect between real GDI and real GDP rhymes with the period preceding the Global Financial Crisis. And, there’s the very real chance that history will in fact repeat and deliver a second Trump presidency later this year. Along with heightened global geopolitical risks, the Axis of Autocracy, reduced fiscal support from governments, a deflating Chinese property bubble, and an ongoing US commercial real estate crisis, 2024 is a year for investors to be nimble and tactical. There will be sensational trading opportunities for those able to navigate the risks hiding in plain sight.
As the clouds of Volatility, Uncertainty, Complexity and Ambiguity continue to swirl, the silver lining is that we are on the road back to normal monetary policy settings, from abnormal, and a return to more rational asset prices. But we must be patient.
Jonathan Pain, Author and Publisher of The Pain Report, is a regular key note presenter at Portfolio Construction Forum's continuing education programs. Over the years, he has debuted new investment theses and challenged delegates about how to build better quality investor portfolios...
Since I addressed Markets Summit 2022 back on 23 February, arguing "The days of abnormal monetary policy are over", Russia's invasion of Ukraine has triggered a food and energy crisis while declining consumer sentiment and Chinese lockdowns provide headwinds to growth.
With US inflation at a 40-year high, and the housing and labour markets red hot, the US Fed has finally taken a distinct and meaningful step forward on the path back to normal. Investors need to accept that the days of abnormal monetary policy are over.
On Monday, the US central bank acted with stunning shock and awe. Then, government after government announced the biggest fiscal support packages ever seen in history. All of which begs the billion dollar question - sorry, multi, multi trillion dollar question. Are we out of the woods?
The market has now woken up to the size of the traumatic shock to the global economy, which just hit a massive air pocket. In the next few weeks, financial markets and the broad capital markets will come under severe stress. How does this end?
As we all brace for lift-off in the key US Federal funds rate, a robust, top-down macro perspective will be even more critical to the success of portfolios than ever.