The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
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With inflation comfortably above the growth rate and with what appears to be an energy shock in store in natural gas prices (maybe oil too) over the winter, rising tax rates (in Europe and the US) to pay for the Covid response and fiscal stimulus that is running out, how long will it be before the West is in a recession? My own view is we are barrelling towards this and it will be with before 6 months as I don’t see how any growth can be achieved in this circumstance we find ourselves in.
And the question is what we do at this point, more stimulus?
My money's in oil ATM but come the New Year I may well switch to gold stocks and SHG will be in my hit list.
Great question and not one that I can claim to have an answer to. But macro trends are poor for the West. Their various obsessions with expensive and intermittent ‘green energy’ and massive quantitative easing are likely to cause an economic shock. This is exacerbated by ludicrous valuations of some tech companies.
Societally the social structure is also weak and lacks resilience as collective institutions such as family, church and nation have been deliberately weakened in order to champion individualism and globalism.
This lack of resilience will merely compound the economic shock when it comes.
Long term the $ is being undermined by crypto currencies and by the growing strength of the China-Russia axis. Even ignoring baked in inflation, IMO long term prospects for gold are excellent.
Minecheck" institutions such as family, church "......Family yes CHURCH what has that got to do with real life. Religion is the curse of society and should be banished from this world.
Good post, Minecheck and one whose sentiments I would (largely) agree with.
The trend since the “Great Recession” (and the truth is it can be traced back to the central banks response to 9/11) is that equity and property markets being inflated through easy monetary means are good for the economy, generally, whereas in the century previous to this a good economy judged equity and property valuations, now equity and property valuations appear to judge the state of the economy, to such a point any serious realignment in either would be utter calamitous to the financial system and the economy at large.
The US for example now has an equity market valued at 200% of GDP (USD$45T+), which is now 100% or so above the average going back over a century, a 40/50% pull back in US equity and property valuations down to historical average norms and valuations would at this point create a full blown depression. The same goes for property valuations if they ever drop.
More expensive equities and housing (and soon to be more and more expensive energy) is sucking more and more life out of real GDP and productivity as it vacuums up all the capital and a financial system that has got itself into such a predicament where a material fall in either will cause a full blown financial breakdown.
Hard to see an obvious exit here.