Politics and World Chaos are in the Air, Don’t Lose Sight of Market Bubble
The attack in Nice, France, was a terrorist act, and the French government extended the state of emergency for 3 months and soldiers will be deployed.
The military coup in Turkey, points up the extreme dissidence in that region of the middle east, it is not going away anytime soon.
The social, political and personal consequences of the attack are the dominate headlines in the financial world and the real world.
China released economic data showing that economy performed marginally better than expected across a range of indicators.
Last week the US retail sales numbers were a surprise in the data releases and are growing, but remember 70% of the US GDP is consumer relates, do they better be good. China’s retail sales are also good an growing 10% Y-Y according to the latest data.
The growing US inflation threat was highlighted in the CPI numbers, but not in the headline number, it remains subdued under the pressure of Crude Oil prices.
“Most inflation numbers other than the headline are at or above their 20-year averages and the core measures suggest building inflation pressure that the Fed will have to address if it wishes to avoid falling further behind the curve,” according to one economist I read.
The Bank of England (BOE) decded not reducing rates now, but may in August, for investors it is important to take notice the Bank of England is already easing policy.
Today, the central bank’s policy are not just about interest rates, but also about QE policy and regulatory policy.
It is regulatory policy that has already been eased in order to achieve some degree of insurance against financial system problems.
Interest rates reductions would seem to be the most effective policy response to the current situation. This is not because interest cuts will stimulate credit growth because banks are unlikely to rush in and provide credit during the long period of uncertainty that is ahead.
Interest rate cuts reduce the income of all the people and raise the income of younger people, given the patterns of debt.
As economic trends are likely to work against the younger generation in the wake of the UK referendum result aka Brexit.
IMF Chief Chrisyine Lagarde warns that the IMF is to revise down global growth in its World Economic Outlook that is due out this week.
The Big Q: Where is growth going to come from?
The financial markets are not reflecting what’s going on in the real world. History and common sense tells us, that cannot go on forever, but it can last longer that many expect.
Caution, be sure not to be caught by surprise when this very abnormal situation collapses, it will be “Fast and Furious.”
Have a terrific weekend.