Putting things into perspective
We are now officially in the midst of the longest growth rally in recent history. The historical first quarter erased almost all losses across most broad asset classes. In reality not much has changed. In our previous commentary we focused on the global QE drawdown and stretched profit margins for US equities. From a recession watch, we highlighted the effects of a yield curve inversion as well as credits spreads usefulness as a signal for upcoming volatility. All of that will be reviewed again in the following commentary, but first, let’s take a step back and put things into perspective.
What makes an economy grow?
Technological improvements, increased productivity, access to credit, and demographics. It has been quite some time since you’ve heard many focus on demographics. Over the last few decades, much of the developed world has been built on the backs of debt accumulation. There’s sound economic theory to that, but as always when applied at scale, it’s the micro details that make the difference.