A Worrying Set Of Signals"We keep a battery of indicators to gauge, among other things, economic activity, inflationary pressure, risk appetite and asset valuations. Most of the time this dashboard offers mixed messages, which is not hugely helpful to the investment process. Yet from time to time, the data pack points unambiguously in a single direction and experience tells us that such confluences are worth watching. We are today at such a point, and the worry is that each indicator is flashing red .. If our indicators are all near a maximum negative, surely the bottom must be in view? .. Perhaps we should no longer pay much attention to fundamental indicators .. The most worrying explanation for the simultaneous decline in our indicators is that air is gushing out of the monetary balloon. After years of near zero interest rates, asset prices have seen huge rises, but investment in productive assets remains scarce. Instead, leverage has run up across the globe .. if rates cannot be raised after years of rising asset prices and normalizing growth, when is a good time? And if central banks are prevented from reloading their ammunition, what will they deploy the next time the world economy hits the skids?"
- Pierre Gave
LINK HERE to the essay