Daniël Lacalle – Market Euphoria, Global Slowdown
Daniël Lacalle vestigt de aandacht op nefaste economische ontwikkelingen die in de huidige euforie aan de aandacht van velen ontsnappen.
We are in very interesting times. We live what is probably the most surprising bull market in history. Excess of demand-side policies, massive liquidity injections, and low rates have zombified the economy and driven debt to all-time highs, while the economic slowdown is evident.
Publicatie 18 februari
In the eurozone, the mirage of macroeconomic rebound is fading, with very poor figures from Germany, France, Italy, and Spain. At the same time, the collapse of Japan’s GDP in the fourth quarter proves that misguided tax increases do have significant negative implications and the estimates of the global impact of the coronavirus range between an optimistic 0.3% and a cautious 0.7% of global GDP. However, risky assets continue to soar and shrug off poor data in what seems like an endless bullish trend.
There is a determining factor in this equation of weak macro, rising debt, and incorrect policies. Financial repression covers a large part of the risks with a blanket of euphoria. With global money supply at $79 trillion and major central bank balance sheets above $21 trillion, irresponsible monetary policies continue to incentivize excessive debt and too much risk. By making the lowest risk assets -sovereign bonds- exceptionally expensive, the rest of financial assets -stocks, private equity- soar almost in unison creating an illusion of endless rising valuation and optically acceptable multiples. When the 10-year yield of most sovereign bonds is negative in real terms, multiples of equities and financial transactions rise accordingly. However, disguising risk does not eliminate it.
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