• Despite the record fast rise in interest rates, the global economy has not yet come off the rails. It is certainly slowing but proving to be remarkably resilient to the point a ‘Goldilocks’ outcome is now consensus. Some commentators warn global recession is still coming and the transmission impact of higher rates is still working its way through economies. This is certainly the case but it is a sensitive timing argument. For instance, US households that are locked into 2% 30year term loans remain unimpacted (though don’t want to move home and lose the benefit), NZ households that were locked into 3% 5year rates are still immune.
    Posted: Friday 19 April 2024
  • The last two years have been defined by the awkward economic recovery from the chaotic pandemic mess, the resultant rocket inflation and record interest rate rises by central banks to slow demand and slowing economies. We may never know whether the inflation peak and now disinflationary run has simply been a function of a longer term successful covid world to new-normal world transition or whether the sharply higher interest rate settings really did the work of slowing demand. When we look at the resilient global consumption to date and still stimulatory fiscal spending by governments, history may well judge that the supply side merely worked itself out. As we look out on the new year, we can look at the risks / challenges and opportunities/positives for the world and its economies
    Posted: Monday 22 January 2024
  • More questions were raised than answered during the September quarter. There was a general expectation economic data would reveal more and assist central bank policy discussion. Instead, we got conflicting data that showed resilient or at least improving economic activity in most economies, re-igniting inflationary pressures and central bank statements showing they are wedged firmly between the competing priorities of price stability versus employment (growth).
    Posted: Thursday 19 October 2023
  • It feels too long since the Covid lockdowns to still call the rebalancing of the global economy “transitional” but that is what it is. Central banks and governments initially expected the transitional phase would be shortish and inflation fleeting but here we are 18months later and global supply and demand is still trying to equate.
    Posted: Thursday 20 July 2023
  • The global economy began the year in a position of economic resilience as trends in late 2022 were generally better than expected (NZ excluded). The IMF recently predicts world growth in 2023 at 2.8% down from 3.4% in 2022. Stronger economies are providing a challenge for inflation management as are the inflationary effects of increasingly fragmented global trade.
    Posted: Wednesday 19 April 2023
  • It remains deeply ironic that extreme government fiscal and central bank monetary stimulus deployed to combat Covid lockdowns in 2021 then exacerbated the sharp inflationary impulse generated by the re-starting global economy.
    Posted: Tuesday 24 January 2023
  • Since the Fed’s speech at Jackson Hole over six weeks ago, financial markets have succumbed to relentless selling. We must look back in the history books to find worse records of performance. How did we get here? Simply put, Covid. Unprecedented non-war time global fiscal and monetary stimulus was applied to stave off a pandemic induced depression. It worked. Global growth rebounded in 2021 and continues to expand however it has been funded by massive public debt making any further fiscal profligacy a problem.
    Posted: Tuesday 18 October 2022
  • The June quarter was another difficult period for investment markets rounding off a tough start to 2022. After the strong Covid 2021 economic recovery, markets became deeply pessimistic despite still reasonable global economic momentum. The US share market (S&P 500 index) experienced its worst half year run since 1970, dropping -21%.
    Posted: Tuesday 19 July 2022