Dear Ladies and Gentlemen
Who would have thought that right after the Great Financial Crisis we would see the first decade ever without a U.S. recession? More than ten years have passed since the end of the last U.S. recession, which happened in July 2009. The decade that just ended is actually the first one without a U.S. recession since the U.S. declaration of independence in 1776.
One can easily argue that the monetary policies of the U.S. Federal Reserve and other central banks certainly helped. True, this certainly helped.
Nevertheless, there are many people out there who completely misjudged the situation over the last decade and probably also missed most of the markets’ upside.
Overall, Ladies and Gentlemen, it is also clear that the global economy expanded more strongly in the 75 year period after World War II than ever before. Reasons for this can be found amongst other things in an „end of war“ relieve, infrastructure investments, ground-breaking inventions and population growth. Another economic success story came from some countries in the Far East. This has been particularly true for China where over the last 20 years hundreds of millions of people have risen from poverty to middle class. Keep in mind that the West also benefited big time from this effect.
Therefore one can easily state that the circumstances leading to this recession-free decade in the U.S. were certainly very positive and exceptional and now, today, I am asking myself, if we will see another such positive and exceptional decade or if we will see dampening effects from low interest rates, over-indebted public- and private households, over-ageing populations in G20 nations, pension reforms leading to lower disposable incomes and thus dampening effects on private consumption, lower growth rates from the typical silicon valley companies leading to a dampening base effect and, and ,and.
I am usually a rather positive person but currently I am cautious. Another reason for being cautious is that we have been looking at research analysing consensus forward guidance of large investment banks, brokers, analysts and asset managers. You probably are aware that the people working for such organisations are very skilled, well-educated and they do nothing else but analysing macro and micro economic data, simulating models and taking assumptions. This is their job and it certainly is a very interesting one.
Yet, and strangely enough the majority of those analysts believes that we will not see any big changes in the markets and/or economy in the near-term future. Depending on the market (macro economics, precious metals, currencies, bonds, equities, commodities, etc) there are consensus deviations, but overall the picture is astonishingly homogeneous. If we take the average from the data we have looked at, we will recognise an expectation for modest economic growth and modest positive market performance.
Now, and this is why I am slightly cautious at this very moment, I have the impression that the average almost never happens. I have no statistical evidence backing my impression but thinking back. I can’t recall any such economic research consensus having materialised.
Please let me know what you think, Ladies and Gentlemen, are we going to see another Great Financial Crisis, or will we see perfect markets for another decade? Please share your thoughts, but please don’t forget (instead of hitting the reply button) to send your messages to:
Many thanks, indeed!
Ladies and Gentlemen, I wish you a great day and weekend.
Kind regards.
Yours truly,
Stefan M. Kremeth
Wealth Management
Incrementum AG
Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li
Web: www.incrementum.li