Geared markets: When consensus erodes and assumptions grow
The list of things investors can not agree on is growing despite the agreements by market pundits. Consensus can be wrong and when constituencies have different agendas there is the potential to have bifurcating outcomes. In addition, given that everything seems to be negotiated in social media and market liquidity is optimized through ETFs we think market participants should be prepared for volatility. The disconnect can be compared to the divergence between the actual state of our U.S. economy and that of the global market. One thing is clearer than ever; Perspectives matter when approaching any question in deeming an answer to be right or wrong. We’ll get to where we are in the market, but to simplify our message there are five things we would like you to focus on.
- What is a reserve currency?
- What will the idea of nations mean in 2050?
- What is negative yielding debt?
- What is adebt super cycle?
- The forgot ten workhorse of the global economy. The consumer. How’s the consumer feeling?
Before we get to the questions, let’s talk assumptions, specifically assumptions regarding the middle class. Assumption #1; The middle class has experienced many periods in history with prosperity and growth. Infact, over history, the middle class as often struggled. The last 50 years in the US (or maybe the last 50 minus the last 10) may very well be the outlier and not the norm. Now back to the questions.