Jeroen Blokland

This week, the UK Chancellor of the Exchequer will present the UK’s new budget. Since the September 2022 debacle, when Liz Truss and Kwasi Kwarteng’s bizarre tax plan almost brought the UK’s pension and insurance system to the brink of collapse, the extra attention has been justified. In the end, the Bank of England had to intervene to “save the furniture”, as the Belgians say. This earned Liz Truss the dubious honour of the shortest-serving prime minister.

This column is not about where that economic recession remains, but about an earnings recession that has passed. At least, if my global profit indicator is to be believed.

The recent inflation bombshell must have rattled Powell and his cohorts, throwing a wrench into their plans for imminent rate cuts in pursuit of a smooth economic descent. Equities, too, find themselves on shakier ground.

It’s fascinating to observe central bankers like Federal Reserve Chairman Jay Powell outside their usual realm, especially on platforms like CBS’s “60 Minutes.” Powell’s candid admission about the US being on an unsustainable fiscal path is a concern is shared by many investors, including myself, particularly regarding the sustainability of mounting debt used to stimulate economic growth.

“I’ve got to say, I’m usually skeptical of the phrase “This time is different.” More often than not, it’s not. But the persistent strength of the U.S. economy, particularly the job market, is making me think twice. Maybe this time really is different.

With many aspects, a distant perspective can be quite enlightening. This certainly applies to monetary policy, in my view. The more I distance myself, the more evident it becomes that for some central banks, debt management, rather than inflation – as officially proclaimed – is their primary objective. Japan is a prime example.

Markets can often be inscrutable, as seen in December’s US inflation data, which showed a rise in headline inflation to 3.4 percent, unexpectedly surpassing the forecast of 3.2 percent.

Shares have been muddling along since, in a reaction seemingly consistent with these figures. Yet, this contradicts the trends observed in recent months. 

I am captivated by a recent chart from Bloomberg that illustrates the anticipated movements in interest rates by central banks globally. What particularly catches my attention is Japan, represented in yellow on the far right of the chart.

The imminent decision by the U.S. Securities and Exchange Commission (SEC) on a series of U.S. spot Bitcoin Exchange-Traded Funds (ETFs) is stirring up the Bitcoin investment community. While many investors are caught up in a typical “buy the rumour, sell the fact” scenario, it’s crucial to consider the long-term implications on Bitcoin, guided by what I term the “7% principle”.

A major hazard for investors is becoming too entrenched in their beliefs, especially when evidence suggests a different narrative. While the idea of a “soft landing” may seem overly optimistic, it’s undeniable that some bastions of investment remain resilient, as evidenced by sustained corporate profits.

Mismatch