Tidbits of good news will send equity markets soaring in the short-term. But the longer-dated fear is that central banks will be forced to respond to a financial accident without having dispatched the inflation genie.
Jerome Powell is bent on “driving the car into the ditch”. But if history is any indicator, widespread fears of low single digit returns for equities are overblown.
As the world threatens to plunge into recession, the distressed debt opportunity set is expanding. Even high-quality businesses are feeling the effects of inflation and rapid rate rises.
The opportunities of the decarbonisation boom are nigh endless. But a rising tide won’t lift all boats, and there’s plenty of ‘worst in breed’ companies that will surprise to the downside.
It’s a good thing the superannuation industry hasn’t received “chapter and verse” from the government on its affordable housing plan. But details around performance still need to be worked out.
In the madness of the last nine months, optimism has become a contrarian position. But there’s still plenty to be optimistic about in US equities.
The Your Future Your Super (YFYS) performance test introduces systemic risk into superannuation and discourages the involvement of funds in nation-building projects. But tweaking the test itself might be a tall order.
For all the risks that lie up ahead, the market is pricing very few of them in. But the situation in the United Kingdom should be a warning to investors of the “accidents” that may come.
As a forty-year long bull run fuelled by cheap money screams to a stop, markets are at an inflection point. This time really could be different.