Obviously, not all the market rebound comes down to a sense that Big Brother won’t let anything hurt us. For investors, riding the wave while it lasts only makes sense, especially when there isn’t a clear end in sight.Īnd yet, what should be of concern in this environment is the build-up of a kind of moral hazard, which Google helpfully defines as “lack of incentive to guard against risk when one is protected from its consequences.” Because across the board, in all of these recoveries from New York to Shanghai, you can detect the not-so-invisible hand of government backstopping the markets. Even those market-watchers who judge the business cycle to be in its late stages often point out that the late stages can last for a long time. We’re enjoying (some) growth with low inflation, unemployment is low, and there are few signs of a recession around the corner. If these revived investor spirits are a sign of a Goldilocks economy, then that porridge must be some good. All of the recovery has occurred in 2019: the Shanghai composite is up nearly 30 per cent YTD.
Not surprisingly, Chinese stocks are well on their way to recovering everything they lost in a terrible 2018, and are now only three per cent down from the start of last year. (Yes, Japan, where forecast GDP growth is a hair over 0.7 per cent for 2019…)Īnd who said the China slowdown was something to worry about? Not me! (Well, not today, anyway.) Chinese GDP growth beat expectations in the first quarter retail sales and industrial production both grew by more than 8.5 per cent. Japan’s Nikkei 225 has gained more than 13 per cent. The S&P 500 is up more than 17 per cent year-to-date so is the Euro Stoxx 50. The euphoria isn’t just Canadian, either. The S&P/TSX composite is hovering near its all-time high, up almost 16 per cent on the year - and it’s only April. Yeah, whatever, Steve - you had us at “accommodation.” And it’s all good for stocks. Just look at Stephen Poloz, the Bank of Canada governor, who this week - while holding rates steady - said that “monetary policy needs to maintain a degree of accommodation sufficient to offset … various headwinds until the economic outlook improves.” And that means central bankers are backing off from their curmudgeonly talk of “normalization” and “gradual rate increases” and all that. Sure, GDP growth is slowing, but the upside of downbeat GDP reads is that inflation is moderate, at worst. Or at least that’s how equity markets seem to be pricing it.
Hey, look! Goldilocks is back, in the form of an economy that’s running neither too hot nor too cold.
0 kommentar(er)
