Come sempre accade, quando si è in presenza di un punto di svolta, tutte le emozioni salgono a livelli di intensità molto elevati.

In altre parole, tutti si agitano. E tutti oggi sono agitati, emozionati e confusi.

In particolare gli investitori, cosa che si può capire,

Sono stati messi lì in un angolo, a giocare con le bambole di pezza, per un anno, mentre la Governante raccontava le favole zuccherose. Di particolare successo, la favola del lupo, ovviamente, ma pure la favoletta del “boom economico” ed anche la favola dell’inflazione transitoria.

Tutti felici, sorridenti, rilassati e … imbambolati.

Oggi, in giro non si trova più nessuno che non abbia una preoccupazione. Preoccupa l’inflazione, preoccupa la recessione, preoccupa il prezzo del petrolio, preoccupa l scarsità dei rifornimento, preoccupa ancora persino il COVID, e naturalmente preoccupa il finanziamento del debito pubblico (“tetto del debito”).

Tutto preoccupa, mentre solo due mesi fa, quando tutti erano in vacanza, sdraiati sulla sdraio, sotto il sole, il pensiero dominante era l’opposto: “questa volta, le abbiamo risolte proprio tutte”. Naturalmente, stampando soldi a manetta, la soluzione universale per ogni genere di problema.

Poi tra agosto e settembre tutto lo scenario è stato sovvertito, e a metà ottobre è arrivata la notizia da tuti temuta (ovviamente, non era temuta da noi di Recce’d e neppure dai nostri Clienti): nell’ultima settimana, quella di metà ottobre, chiunque è stato costretto a riconoscere che quella della “inflazione transitoria” era ed è sempre stata soltanto una patetica bugia, anche quella detta ai bambini “a fin di bene”.

Lo ha scritto anche Bloomberg, questa settimana, nel titolo che leggete qui sopra in apertura del Post: “I numeri, adesso, non possono essere smentiti”. E lo riferisce anche il titolo che segue, qui sotto.

Come sempre è successo, e come sempre sarà, è la realtà a prevalere sulla fantasia. I dati non possono essere smentiti.

Ma soprattutto, questo fatto recentissimo dovrebbe ricordarvi una cosa: è assolutamente sbagliato affermare che “un po’ tutti hanno ragione, a turno ora questo ora quello”.

No, è falso: uno solo ha ragione, e chi invece affermava l’opposto ha torto, e questo perché la realtà è una sola, non ce ne sono due.

E dunque: chi diceva a inizio anno che l’inflazione NON era transitoria ha ragione, gli altri hanno sbagliato. Molti non consapevolmente, altri scegliendo di … fare i fessi in commedia.

Sarà così anche per quello che riguarda i mercati finanziari, non c’è dubbio: solo uno, ha ragione, sui mercati finanziari.

Ed anche se i tempi sono sempre incerti (“quando arriverà la svolta sui mercati?”: risposta, quando vuole arrivare, ma questa volta più di altre volte in modo improvviso e rapissimo) non esiste modo per i mercati finanziari di aggirare la realtà, che prima o dopo passa e chiede il conto.

Per arricchire e completare questo nuovissimo Longform’d, vi proponiamo in lettura un altro articolo che è stato pubblicato in settimana dal New York Times. Un articolo che viene seguito più in basso da un nostro commento. E che si apre con un episodio che riguarda proprio uno dei nostri amici wealth managers, ovvero private bankers, ovvero promotori finanziari, ovvero consulenti addetti alla vendita (di Fondi Comuni).

Oct. 15, 2021

Terrell McCallum, a private wealth adviser in Dallas, spends a lot of time thinking about markets and interest rates. He knows that the Federal Reserve targets 2 percent annual price increases on average, so it was a shock when he learned that his rent would increase a whopping 10 percent this year.

“I can afford it, but it gets to the brink of financial burden,” said Mr. McCallum, 33. He and his wife have been saving up for their first home, but now that they are paying $1,830 for their apartment and fees, that will become more difficult. He tried to push back on the increase, but the company he rents from wouldn’t budge.

“They said: ‘This is what the market is doing.’”

Mr. McCallum’s experience is echoing across America, as rents shoot higher after a brief pandemic slump, burdening households and fueling overall inflation. That is bad news for the Federal Reserve, because it could make today’s uncomfortably rapid price gains last longer. It’s also problematic for the White House because it hits households right in their pocketbooks, diminishing well-being and fueling unhappiness among voters.

The jump in rents stemmed from a frenzy in the market for owned homes. People tried to buy as the pandemic took hold in the United States, often searching for extra space, but found that houses were in short supply after years of under-building following the housing crisis. That dearth of properties has been exacerbated by work stoppages, supply shortages and labor constraints during the coronavirus era, all of which have kept developers from ramping up production to meet demand.

As buyers bid up prices on single-family homes and condominiums, many people who would have otherwise moved toward homeownership found themselves unable to afford it, increasing demand for apartments and home leases. Rents have been further boosted by the large number of people searching for places with more space and home offices during the pandemic, and as millennials in their late 20s and early to mid-30s look for more autonomy.

“People might be looking to move out and on their own after being stuck with roommates during the pandemic,” said Adam Ozimek, the chief economist at Upwork, an online freelancing marketplace. “There’s also a possibility that remote work is playing a role here.”

Government stimulus checks and expanded unemployment benefits also helped people amass savings over the course of the pandemic, so they can afford to move. Personal savings as a share of disposable income popped during the crisis, and while the share has come down toward normal levels, it remains slightly elevated at 9.4 percent, compared with about 8 percent just before the pandemic.

The combination of factors seems to have created a perfect storm that pushed the Consumer Price Index measure of rent up 0.5 percent just between August and September, the fastest pace in about 20 years.

That’s a concern for the Fed, because housing prices tend to move slowly and once they go up, they tend to stay up for a while. Rent data also feed into what is called “owners’ equivalent rent” — which tries to put a price on how much owners would pay for housing if they hadn’t bought a home. Together, housing measures make up about a third of the overall Consumer Price Index.

Overall consumer prices have jumped sharply in 2021, climbing 5.4 percent in September from the prior year. Fed officials have been hoping and betting that the move is temporary, but they are watching housing measures carefully as a risk to that outlook.

“Many participants pointed out that the owners’ equivalent rent component of price indexes should be monitored carefully, as rising home prices could lead to upward pressure on rents,” minutes from the Fed’s September meeting, released Wednesday, said.

Rent is less critical to the Fed’s preferred inflation gauge, the one it officially targets when it shoots for 2 percent annual inflation on average, than it is to the C.P.I. But it is a big part of people’s experience with prices, so it could help shape their expectations about future cost increases.

Those expectations matter a lot to the Fed. If consumers come to anticipate faster inflation, they may begin to demand higher wages to cover their rising expenses. As businesses lift prices to cover rising costs, they could set off an upward spiral. Already, some key measures of inflation outlooks — notably the New York Fed’s Survey of Consumer Expectations — have jumped higher.

The Fed is already preparing to start slowing the large bond purchases it has been making during the pandemic to keep longer-term interest rates low and money flowing around the economy. If inflation stays high, the Fed may also come under pressure to raise its policy interest rate, its more traditional and more powerful tool. That might slow mortgage lending, cool the housing market and weigh down inflation.

But doing that would come at a big cost, slowing the labor market when there are 5 million fewer jobs than before the pandemic. So for now, Fed officials are getting themselves into a position where they can be nimble without signaling that they’re poised to raise rates.

White House officials are also wrestling with their options for easing housing price pressures. President Biden’s economic agenda includes measures that would build more houses and discourage zoning rules that keep new construction at bay.

Such an intervention would take time — homes are not built overnight. And in the meantime, rents will almost certainly continue moving in the inflation data, which reflect rising housing costs at a long delay. More up-to-date measures of rental pricing pressure produced by Apartment List and Zillow have shown costs climbing in recent months, though many measures of rent and new leases have calmed down somewhat after a red-hot summer.

The national median rent has increased 16.4 percent since January, Apartment List said in its September rental report, with monthly growth slowing slightly from its July peak.

U.S. Inflation & Supply Chain Problems

Covid’s impact on supply continues. Price increases that grew out of pandemic-related shutdowns and supply chain disruptions have continued. Here are some of its effects:

Prices jumped more than expected in September. The Consumer Price Index climbed 5.4 percent in September when compared with the prior year, raising the stakes for the Fed and the White House, which are now facing a much longer period of rapid inflation than they had anticipated.

Social Security benefits will rise 5.9 percent in 2022. The increase, which is tied to the Consumer Price Index and is known as a cost of living adjustment, is the largest in 40 years.

Rents have shot higher. The increase is burdening households and fueling overall inflation. That’s bad news for the Fed, because it could make uncomfortably rapid price gains last longer.

The Port of Los Angeles will operate 24/7. The expansion of the port’s hours comes as the Biden administration struggles to relieve backlogs in global supply chains, which are contributing to inflation. ​​Walmart, UPS and FedEx will also increase operations.

Wall Street is concerned about stagflation. The toxic mix of sluggish growth and high inflation is driving fears about the possible return of an economic specter from the 1970s: stagflation.

“This is still very strong by historical standards — we’re in off season,” said Igor Popov, chief economist at Apartment List. “It’s a racecar slowing down ahead of a turn, but it’s still going faster than we ever have in our lives.”

Whether rent growth speeds up or slows next year may hinge on whether the government support that has given households the financial ability to afford housing gives way to a strong job market.

“There’s room to run, for sure,” based on demographics alone, Mr. Ozimek said. “The question is whether the economy is going to go into full employment, or whether there’s a slowdown.”

Rents could heat up as big cities including New York and Los Angeles rebound from the pandemic, said Daryl Fairweather, chief economist of Redfin. While smaller cities’ rental markets have been hot for months, the median rent in Manhattan climbed for the first time since the start of the pandemic in September, data from Miller Samuel and Douglas Elliman showed.

The recovery in the New York area as a whole has been uneven as some families have moved to the city, bidding up prices, while others are struggling to pay, said Jay Martin, executive director of the Community Housing Improvement Program, which represents landlords of mostly rent-stabilized housing.

“You have bidding wars for one unit, and then a renter who can’t pay,” he said. “A tale of two cities is happening within the same building.”

Drew Hamrick, the senior vice president of the Colorado Apartment Association, a landlord group, said the rise in rents is not driven by landlords but by market factors.

“Landlords don’t really set the price, consumers set the price,” he said. “It’s musical chairs.”

Even if there is a pullback in rents next year, today’s suddenly higher housing costs could make for a painful adjustment period. Higher rent costs can reverberate through people’s lives and force tough decisions.

Luke Martinez, a 27-year-old in Greenville, a town in East Texas, is contemplating buying a trailer and setting his family up on an R.V. lot after learning that he is losing the three-bedroom house he has been renting for about $1,000 per month since 2016.

“It’s insane the amount of rent, even in this little podunk town,” Mr. Martinez said.

He’s looking at paying up to $1,500 per month for a new place, which will be tough. After getting laid off at the start of the pandemic, he had been living partly on savings — padded by an insurance payout after his car was stolen and totaled. He returned to working in automotive repair only this week. His wife had been working the front desk at a hotel until two months ago, but she is now home-schooling their 8-year-old.

If they end up renting at the higher price, they will most likely afford it by forgoing a new car.

“It’s pretty much just scraping by,” he said of his lifestyle.

Jeanna Smialek writes about the Federal Reserve and the economy for The New York Times. She previously covered economics at Bloomberg News.  @jeannasmialek

Questo articolo a noi serve nell’ambito del Longform’d come esempio. Esempio che serve a ricordare a voi, lettori del Blog, che se vi hanno detto che ‘inflazione non è un problema di cui tenere conto, perché non si vede nella vita quotidiana, vi hanno appena raccontato l’ennesima favoletta, come è facile dimostrare andando alla pompa per fare il pieno di carburante per l’auto, oppure quando si riempie il serbatoio per il riscaldamento della casa, anche qui in Italia.

Una seconda cosa che ci è molto utile, dell’articolo che avete letto sopra, è il richiamo agli Anni Settanta, richiamo che chi segue il Blog ricorderà, fin dall’agosto del 2020, ovvero 15 mesi addietro, come il nostro tema forte.

Il lavoro di ogni gestore di portafoglio sta prima di tutto in questo: nell’essere efficace nella costruzione di scenari credibili (e non ridicoli come quelli della “inflazione transitoria”).

Scenari che sono INDISPENSABILI per poi formulare in modo razionale fondato aspettative di rischio e rendimento per azioni, obbligazioni, valute, oro, petrolio e persino Bitcoin.

Non si riesce proprio a comprendere come in tanti abbiamo la pretesa di affermare che “le azioni faranno così” oppure le obbligazioni faranno cosà” oppure “il petrolio può solo salire” quando neppure capiscono (neppure alla lontana) che cosa sta accadendo nella realtà intorno a loro. Eppure, moltissimi insistono, a sparare bolle di sapone in aria, e c’è poi sempre qualcuno che le scambia per il sole.

Oggi, il tema di mercato, in tutto il Mondo, è per tutti la stagflazione, come dice anche l’immagine più sotto. Come già detto, vi sarà utile riflettere sul fatto che nell’agosto 2020 Recce’d vi scriveva e vi parlava di stagflazione, mentre tutti gli altri vi scrivevano e parlavano di “boom economico” e di “inflazione transitoria”.

Non lo abbiamo soltanto detto: abbiamo anche operato, a favore e nell’esclusivo interesse del Cliente, in questa direzione. per questo, mentre voi lettori oggi siete divorati da ansie assortite per il vostro portafoglio, i nostri Clienti guardano al loro futuro cone legittime aspettative di guadagno. Quelle che voi, oggi, non avete più.

Ovviamente, voi amici lettori del Blog siete liberi di stare a sentire chi vi pare, e di parlare di chicchessia: ma la competenza, nel mondo degli investimenti, conta, e conta moltissimo. La differenza tra un gestore competente e un chiacchierone impreparato la vedete nei risultati dei vostri investimenti, come sempre a fine corsa. E quindi, … occhio!

Come dice l’immagine sopra, e l’articolo che avete appena letto, voi lettori oggi siete in preda a dubbi ed ansie assortite. Se volete uscire da questa scomoda situazione, che deriva dal non sapere che cosa aspettarsi nell’immediato futuro ed anche nel futuro più distante, scriveteci e fissiamo un contatto via telefono al più presto. Noi siamo qui per ascoltarvi e proporre le nostre soluzioni ai vostri problemi. Nel frattempo, a proposito di problemi, potete leggere nell’articolo che segue di un’ondata di tensioni sui prezzi e sui tassi che ha colpito ogni angolo del Mondo.

Rising inflation is triggering anxiety around the world as a surge in demand following the easing of Covid-19 lockdowns has been confronted by supply bottlenecks and rising prices of energy and raw materials.

The sharpest consumer-price increases in years in many countries have evoked different responses from central banks. More than a dozen have raised interest rates but two that haven’t are those that loom largest over the global economy: the Federal Reserve and the European Central Bank.

Their differing responses reflect differences in views about whether the pickup in prices will feed further cycles of inflation or will instead peter out. Which view is right will do much to shape the trajectory of the global economy over the next few years.

The large central banks are relying on households showing faith in their track records of keeping inflation low, and the expectation that there are enough under-utilized workers available to keep wage rises in check.

Other monetary authorities aren’t sure that they have yet earned that kind of credibility as inflation fighters, and see a higher risk that wage rises will surge. In poorer countries, a larger share of spending usually also goes to essentials such as food and energy that have seen the largest price rises, so policy makers are quicker to tamp down on inflation.

Chile’s central bank on Wednesday increased its interest rate by one and a quarter percentage points to 2.75%, surprising economists with its biggest rate increase in 20 years.

“It’s affected us so much, everything has increased,” said Sandra Valenzuela, a 46-year-old in Santiago, who lost her sales job last year and is now grappling with putting enough food on the table at home. “We have to adapt to the economy.”

Her family has cut back on eating meat, saying it is now too expensive, and is buying cheaper brands of other goods.

Price rises began to accelerate world-wide in March, taking inflation rates higher than most central bankers had expected. By August, the annual rate of inflation in the Group of 20 largest economies—which account for about four-fifths of the world’s output—had risen to a decade high.

The inflation surge is being driven by a combination of economic forces that few central bankers have seen before.

The rebound in consumer demand has come much sooner and much more strongly than usual in the aftermath of an economic contraction. But supply has struggled to meet that demand. Expecting a more subdued and more drawn-out recovery, few manufacturers have added capacity during the Covid-19 pandemic, while factories and many parts of the global transport network have been hindered by government restrictions on work and movement.

Central bankers from the Group of 20 leading economies, meeting Wednesday in Washington, D.C., said that they expect that those forces of supply and demand will balance out over coming months, and that as they do inflation rates will ease.

Some of them have already raised key interest rates, most notably Brazil and Russia, which were among the first to move back in March. And as inflation has advanced, with no clear end in sight, other central banks have joined them.

Of the 38 central banks tracked by the Bank for International Settlements, 13 have raised their key rate at least once. In October, the central banks of New Zealand, Poland and Romania increased borrowing costs for the first time since the pandemic struck. Singapore, which tightens policy by nudging its exchange rate higher, joined that group Thursday.

For all central bankers, the big worry is that inflation becomes embedded as households start to factor expectations that faster inflation is here to stay into wage bargaining and businesses make the same assumption as they set prices. Where memories of high rates of inflation are fresher than they are in the U.S. and Western Europe, that is a greater risk.

“Emerging markets are turning hawkish because there is a risk of inflation expectations going much higher,” said Bhanu Baweja, chief strategist at UBS Research.

Almost every country in South America has been through a period of very high inflation in living memory, and prices are again surging there following a decline in new coronavirus infections. Without increases in wages to match, many households are in financial peril.

Like Chile, Colombia and Peru are also seeing rising prices after years of controlling inflation. That has prompted central banks in both countries to tighten their monetary policy as households struggle to make ends meet.

With food markets on a wild ride lately, cheese has seen more volatility than most. Yet in supermarkets, prices have remained relatively stable. Here’s why sharp changes in wholesale cheese prices are slow to make it to consumers. Illustration: Jacob Reynolds

Peru, which had one of Latin America’s biggest economic contractions in 2020, is grappling with its fastest increase in consumer prices in more than a decade. The central bank has been raising its reference interest rate since August, including a half-point increase in October to 1.5%. Peru’s inflation hit 5.2% in September.

Most current central bankers work off a game plan that owes much to the successful fight against very high inflation last seen in rich countries during the 1970s. A key lesson they take from that period is that when wages rise very quickly to match inflation, further sharp rises in prices are likely, and a vicious cycle ensues.

In some countries, the risk of a wage and price spiral is greater because there are few workers who can be recruited to help meet rising demand.

That is a particular problem in Central Europe, where a number of central banks have raised their key interest rates over recent months. Emigration to richer Western Europe and low birthrates have reduced the number of workers. According to projections from the European Union’s statistics agency, Poland’s population could fall by more than a fifth by 2100.

“Central and Eastern Europe is one of the regions of the world where we think that the risk of sustained higher inflation in the next few years is greatest,” said Liam Peach, an economist at Capital Economics.

For policy makers at the Fed and the ECB, the threat of a wage and price spiral seems lower, while they are also counting on memories of a long period of very low inflation to anchor household expectations of future price rises. That view has recently been questioned by economists, including Fed economist Jeremy Rudd, who argues the evidence simply doesn’t show expectations actually drive inflation.

Rising food and energy prices have also pushed up inflation across much of sub-Saharan Africa. Ethiopia’s central bank in August raised its rate for lending to commercial banks to 16% from 13% and doubled the cash-reserve ratio requirement for commercial banks to 10%.

Inflation in sub-Saharan Africa’s top wheat producer surged to 30% in September, from 26.4% the previous month, as a mix of conflict, blocked trade routes and locust infestations cut food production.

For most parts of Asia, central banks are still cautious about tightening monetary policy too early for fear of undermining weak economic recoveries which weren’t stoked by big official stimuli.

Chinese producers have so far absorbed rising commodity prices, hurting their profitability. China’s factory-gate inflation surged 10.7% in September, the most in nearly 25 years, in large part due to higher coal prices. The country’s consumer inflation rose 0.7%, far below the official target of around 3%.

Speaking at the G-20 forum on Wednesday, China’s central bank governor, Yi Gang, said the country’s inflation is generally “mild.”

In Turkey, President Recep Tayyip Erdogan this week fired three top central-bank officials. He has demanded lower interest rates to encourage economic growth, raising concerns among investors who say rate cuts will add to inflationary pressures. Turkey’s annual inflation rose to 19.58% in September, its highest level in 2½ years, according to the country’s official statistics agency.

Elsewhere, governments are resorting to measures that were common during the 1970s, but have since been set aside in most countries. On Wednesday, Argentina’s interior commerce secretary, Roberto Feletti, announced a 90-day price freeze on 1,247 goods in stores amid concerns about rising food prices.

“We need to stop food prices from eroding salaries,” he said.

Siamo sicuri che la lettura dell’articolo precedente ha competato le vostre informazioni con qualche elemento che fino ad oggi vi era sfuggito, dato che i media nazionali non attribuiscono alcuno spazio ed alcuna importanza a notizie di questo genere, mettendo invece sempre in prima pagina i “successi del Governo Draghi”. Eppure, fenomeni globali di questa portata vanno a toccare in modo diretto anche i vostri personali interessi, e soprattutto il vostro portafoglio di investimenti.

Noi questo tema lo abbiamo affrontato qui nel Blog in numerose occasioni, nel corso del 2021: oggi, ci ritorniamo nel Longform’d grazie all’articolo del Financial Times che leggete qui sotto.

Siamo arrivati al punto di non ritorno non soltanto per ‘inflazione, come detto in precedenza, ma pure per la compiacenza degli investitori e dei mercati finanziari, come dice benissimo l’articolo.

“Quando arriverà la svolta dei mercati?”, in molti si domandano. Leggete bene l’articolo, e capirete che è già qui. E’ già arrivata.

Come si dice, in modo particolare, alla chiusura dell’articolo in questione, i mercati ancora oggi sono sostanuti dalla convinzione del pubblico che “La Federal Reserve non lascerà scendere i mercati finanziari”, ma adesso la situazione è molto diversa anche dal recente passato.

“Something has to give”, qualcosa dovrà cedere. Un anello della catena dovrà spezzarsi.

Se voi amici lettori vi siete affidati ad un competente gestore di portafoglio, lui a quest’ora ha già capito, e provveduto. In caso contrario, avrete serie difficoltà

It felt too good to be true and maybe it was. The Panglossian optimism that prevailed in the markets over the summer has faded thanks to perceptions of weaker growth momentum in the global economy and, more especially, in those twin engines of global growth, the US and China.

Business and consumer confidence has waned, job growth has underwhelmed, energy prices have spiked and supply bottlenecks are everywhere. That, in turn, has given rise to growing concern about inflationary pressure. Central bankers who earlier insisted that surging inflation was purely transitory are now having second thoughts, raising the possibility that they will soon reduce the support they have been offering to a recovery that now appears to be flagging. In a delicately revisionist phrase, Andrew Bailey, governor of the Bank of England, has talked of possible circumstances in which “transience would be longer”.

Since September the result has been falling equity prices and rising bond yields. This has spelled trouble for conventional portfolios comprising 60 per cent equities and 40 per cent bonds. The change in correlation between the two asset classes means that there is no longer a rise in bond prices and fall in yields to offset the pain if equity prices fall.

That is what happened in the great stagflation of the 1970s which was also marked by spiking energy prices. It required dramatic rises in interest rates to curb soaring inflation expectations. Under Paul Volcker, the US Federal Reserve raised policy rates to close to 20 per cent in 1981. In an effort to re-anchor expectations, the Fed held rates above inflation into the new millennium. In the early 1980s, developed world economies were much better equipped to handle abrupt increases in interest rates than they are today. Debt levels were low whereas now, because of the pandemic, global debt in 2020 jumped by 14 per cent to a record high of $226tn, having seen a big earlier surge after the financial crisis of 2007-09. That reflected the central banks’ ultra-loose monetary policy which encouraged borrowing and a bond-market bubble.

Another consequence of the Fed suppressing Treasury yields through its asset purchasing programme, highlighted by Steven Blitz of TS Lombard, is that equities have become an outsized percentage of household net worth in the US and thus have an outsized impact on discretionary consumer spending. He believes the implication is that an overvalued equity market has become a vigilante governing Fed actions. This seems counter-intuitive. Bond market vigilantes in the 1970s imposed fiscal discipline by refusing to buy excessive issues of government debt in the primary market. An equity vigilante today would be selling shares in the secondary market to pressure central banks into monetary indiscipline. Yet Blitz is onto something.

There is no question that if the monetary authorities normalise policy, the resulting tightening of financial conditions could damage the recovery. In its latest Global Financial Stability Report, the IMF says that there is significant uncertainty about the effect of normalisation on asset prices given the larger role central banks play in sovereign bond markets, the anticipated increase in the supply of government IOUs and diverging monetary policy cycles across countries. If anything that understates things because of the extraordinary extent to which central banks have nationalised global securities markets. The IMF’s own figures show that monetary authorities have increased the assets held on their balance sheets to close to 60 per cent of gross domestic product, almost double the level prevailing before the pandemic. Any reduction or reversal of the support the central banks now offer to the global economy and to markets could thus have a devastating impact.

The central bankers know this and they also know that if their response to rising inflation precipitates collapsing markets and a recession it could cost them their independence. It follows that there could be a behavioural bias towards caution and delay in tightening. Yet the lessons of monetary policy in the 1970s and 1980s were that while rising unemployment resulting from early tightening could easily be addressed by a change in policy, delay would cause inflationary expectations to become unmoored. A much tougher policy and a more serious recession were required to bring inflation under control.

Delay was in fact the response of the Fed under Arthur Burns, who insisted that the rise in oil and food prices was not a monetary phenomenon and therefore should be ignored. That was how the US arrived at a benchmark policy interest rate around 20 per cent and a horrendous recession in the early 1980s. Few now doubt that the central banks will shortly cut back their asset purchasing programmes. Yet investors’ deep seated conviction that monetary authorities will always come to the rescue if markets tank suggests that weakness in bond and equity prices will not turn into a rout just yet. That said, we are in an unstable equilibrium. In due course something has to give. john.plender@ft.com

Non abbiamo alcun timore di smentita: Recce’d ha scritto e parlato con i propri interlocutori di stagflazione prima di chiunque altro, nell’ambito degli operatori sui mercati finanziari.

Ne sono testimoni prima di tutto i nostri Clienti. Poi tutti i nostri interlocutori sui mercati finanziari. Ed anche tutti gli amici che ci hanno contattato nel 2020 e nel 2021.

Ne è ovviamente testimone anche il nostro Blog.

Oggi, dopo quindi mesi dai nostri primi allarmi su questo rischio, ne scrivono e ne parlano tutti, ma proprio tutti tutti tutti.

Molti di questi non ne capivano granché quindici mesi fa, e capiscono ancora meno oggi. Altri, per fortuna, sono più qualificati.

Un esempio è il quotidiano The New York Times, dal quale noi abbiamo ricavato e selezionato la’rticolo che leggete di seguito.

By Matt Phillips

Oct. 13, 2021

Vaccine mandates seem to be working, younger children may be approved for shots by Halloween, and the coronavirus appears to be in retreat. But those hopeful signs herald a messy new phase for the country’s economic recovery — and that’s putting Wall Street more on edge than it’s been in months.

The Federal Reserve has signaled it could begin dialing back programs that have helped prop up the markets for the past 18 months as soon as next month, while the breakneck pace of economic growth seems to be slowing, a fact underscored by a disappointing September jobs report.

And price increases that grew out of pandemic-related shutdowns and supply chain disruptions have been stubbornly persistent. A key measure of inflation released Wednesday, the Consumer Price Index, climbed 5.4 percent in September compared with the prior year — more than expected in a Bloomberg survey of economists and faster than its 5.3 percent increase through August.

“There’s a lot for the market to digest at one point in time and a lot of unknowns, frankly, that investors are grappling with,” said Matt Fruhan, who manages the nearly $3 billion Large Cap Stock Fund, as well as other funds, for Fidelity.

That uncertainty has halted the momentum that propelled stocks to a series of record highs over the summer. Last month, the S&P 500 endured its deepest drop — 4.8 percent — since the start of the pandemic. Investors have regained a bit of ground in October, but the market has been unable to muster any real momentum. After the inflation report on Wednesday, the S&P 500 slipped again in early trading, then swung back to close up 0.3 percent, snapping a series of three straight declines.

By any objective measure, it has been a good year for stocks, with the S&P 500 up roughly 16 percent through the end of trading on Tuesday. But the recent bumpiness reflects a growing uncertainty about the next chapter of the recovery-driven rally, with share prices swinging more from day to day — and even hour to hour — than they had in months.

The update on the American job market on Friday almost perfectly encapsulated the confusing economic backdrop that investors face: The number of new jobs fell far short of expectations, but wage growth rocketed higher.

“The rate of growth is moderating, yet the rate of inflation is increasing,” said Paul Meggyesi, a currency analyst with JPMorgan in London. “It’s an unusual decoupling.”

Many are looking to history to try to make sense of it, which is why Wall Street is chattering about the chances of a return of an economic specter from the 1970s: the toxic mix of sluggish economic growth and high inflation that came to be known as stagflation.

The comparison isn’t perfect. Back then, inflation hit double digits, and unemployment sat at nearly 9 percent. Neither inflation nor unemployment is anywhere near that high now.

But on Wall Street, the level of attention on stagflation is soaring. Last week, the volume of articles mentioning the term “stagflation” published by the financial news service Bloomberg hit a record, the company reported.

Mr. Meggyesi, who described the current situation as “stagflation lite” in a recent note to clients, is part of that surge of analysts reconsidering the idea, along with the risks it could pose to markets.

The most obvious echo is the surprising, and durable, rise in prices. As costs for things like lumber, microchips and steel climbed this spring, officials from the Federal Reserve took pains to say the rise would prove “transitory.” Once companies returned to normal, officials said, production would increase, supply lines and inventories would be replenished, and prices would fall.

But after a renewed round of economic disruptions caused by the Delta variant of the coronavirus — including many in key Asian manufacturing hubs such as Vietnam — there’s little sign that the upward pressure on prices is going away anytime soon.

A report this month showed that the Fed’s preferred gauge of inflation rose at the quickest pace in 30 years in August, and this week a measure of wholesale used car prices — an increasingly important factor in calculating inflation — hit a historic high.

The rise in prices worries investors for a couple reasons. For one thing, climbing costs can cut into corporate profits, a key driver of stock prices. Traders also worry that if inflation rises too fast, the Fed may lift interest rates to try to control it. At times in the past, rate increases from the Fed have tanked the market. Higher rates make owning stocks less attractive compared with owning bonds, prompting some investors to dump shares.

“I think the reason we’ve gotten more volatile is the market is starting to warm up to the belief that inflation is not as transitory as the head of the Federal Reserve keeps on telling us,” said John Bailer, a portfolio manager at Newton Investment Management, where he oversees mutual funds with more than $4 billion in client assets.

If anything, the upward pressure on prices seems to be growing.

In another echo of the 1970s — when stagflation dynamics were set off by the Arab oil embargo of 1973 — Russia has resisted increasing shipments of natural gas to Europe in recent months despite surging demand. That has sent prices up sharply, halting some industrial activity and producing painful energy bills in continental Europe and Britain.

Oil prices climbed to their highest level in seven years in recent weeks, after the powerful Organization of the Petroleum Exporting Countries moved to lift production only gradually. In Britain — where the term “stagflation” is generally thought to have originated — a fuel shortage last month that grew out of a shortage of truck drivers prompted panic buying and long lines at gas stations, another strange echo of the disorderly 1970s.

“Historically, stagflation has often been accompanied by oil shocks,” said Jill Carey Hall, a stock market analyst at BofA Securities. “There’s definitely a rising concern that we could be in that type of environment.”

The effects of the rise in oil prices have been less dire in the United States, but prices are also up for a variety of major commodities. The S&P GSCI Commodity Index, which tracks 24 traded commodities — like aluminum, copper and soybeans — rose to its highest level since late 2014 in recent days. That suggests inflationary pressures will pinch for a while longer.

The comparison between today and the 1970s seems to break down with the “stag” component of stagflation. By almost every measure, economic growth is expected to be remarkably strong this year.

Analysts polled by Bloomberg forecast that gross domestic product will grow 5.9 percent this year — a number that would be the best mark since 1984.

But predictions for growth are being dialed back. On Sunday, analysts at Goldman Sachs trimmed their 2021 growth forecast for the United States to 5.6 percent. It had been as high as 7.2 percent in March.

And on Tuesday, the International Monetary Fund lowered its 2021 global growth forecast to 5.9 percent, down from the 6 percent projected in July, while warning of the risks of supply chain disruptions feeding inflation. Its forecast for the United States was pared back to 6 percent, from the 7 percent growth projected three months ago.

Even so, Kristalina Georgieva, the managing director of the I.M.F., brushed off any talk of stagflation in an interview on Tuesday. Ms. Georgieva said that the world was experiencing a “stop and go” recovery, and that even if the United States was losing some of its considerable momentum, other areas — including Europe — were gaining it.

“We are not seeing the world economy stagnating,” she said. “We are seeing it not moving in sync across the globe.”

Steven Ricchiuto, chief U.S. economist at Mizuho Securities USA, said the breakneck growth of the first half of the year was never going to be sustainable. “Expectations have gotten out of line with reality,” he said.

But any sense of disappointment — despite numbers that are objectively good — may weigh on the market over the next few weeks, as major corporations begin to report their financial results for the third quarter.

G.D.P. growth is a key driver of revenues for major corporations. A slightly weaker economy could translate into lower sales numbers than expected, just as inflationary pressures mean climbing costs.

That has already been an ugly combination for some companies’ corporate profits. The share prices of several notable corporations — FedEx, Nike, CarMax and Bed Bath & Beyond among them — have been clobbered over the past few weeks after the release of disappointing quarterly reports.

Shares of Lamb Weston, an Idaho-based maker of frozen potato products, tumbled after it fell short of earnings expectations because everything from potatoes to cooking oils to packaging is more expensive. The company’s shares are down about 10 percent since it reported its results and revised its outlook last week, saying its profits would remain under pressure for the rest of the fiscal year.

“We had previously assumed these costs would begin to gradually ease,” said Bernadette Madarieta, the company’s chief financial officer, told analysts.

Other stocks could suffer a similar fate.

“People are going to be further disappointed,” said Mike Wilson, chief U.S. equity strategist at Morgan Stanley. “Even if the economy is OK, it may not translate into the kinds of earnings that people are expecting.”

L’articolo che avete appena letto vi aiuterà a mettere a fuoco le maggiori somiglianze, e le maggiori differenze tra gli anni Venti del nuovo Millennio e gli anni Settanta del XX secolo: ovviamente non tutto è uguale, e sicuramente risulterà diversa anche la reazione dei mercati finanziari.

Recce’d non è in grado di dire al lettore come andrà a finire: questa esperienza che stiamo tutti facendo è del tutto nuova, da più punti di vista.

Recce’d però è stata in grado di dirvi, già quindi mesi fa, che quella del “boom economico” era una balla, e che quella della “inflazione transitoria” era una sciocchezza.

E voi lettori, quali qualità andate cercando in un gestore di portafoglio?

Sul tema degli Anni Settanta abbiamo selezionato, per il nostro Longform’d, un secondo articolo, pubblicato questa volta dal settimanale The Economist.

Il nostro suggerimento è di leggere con attenzione anche questo articolo, ed in particolare di leggere con attenzione la parte finale, proprio per mettere voi stessi in condizione di cogliere al meglio le differenze e le somiglianze con gli Anni Settanta.

Ma soprattutto, potrà aiutarvi a comprendere perché allora, negli Anni Settanta, la situazione era molto, ma molto, più facile da risolvere di quella che oggi abbiamo davanti. Noi, ed i nostri investimenti in titoli.

It is nearly half a century since the Organisation of the Petroleum Exporting Countries imposed an oil embargo on America, turning a modest inflation problem into a protracted bout of soaring prices and economic misery. But the stagflation of the 1970s is back on economists’ minds today, as they confront strengthening inflation and disappointing economic activity. The voices warning of unsettling echoes with the past are influential ones, including Larry Summers and Kenneth Rogoff of Harvard University and Mohamed El-Erian of Cambridge University and previously of pimco, a bond-fund manager.

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Stagflation is a particularly thorny problem because it combines two ills—high inflation and weak growth—that do not normally go together. So far this year economic growth across much of the world has been robust and unemployment rates, though generally still above pre-pandemic levels, have fallen. But the recovery seems to be losing momentum, fuelling fears of stagnation. Covid-19 has led to factory closures in parts of South-East Asia, hitting industrial production. Consumer sentiment in America is sputtering. Meanwhile, after a decade of sluggishness, price pressures are intensifying (see chart 1). Inflation has risen above central-bank targets across most of the world, and exceeds 3% in Britain and the euro area and 5% in America.

The economic picture is not as bad as the situation during the 1970s (see chart 2). But what worries stagflationists is less the precise figures than the fact that an array of forces threatens to keep inflation high even as growth slows—and that these look eerily similar to the factors behind the stagflation of the 1970s.

One parallel is that the world economy is once again weathering energy- and food-price shocks. Global food prices have risen by roughly a third over the past year. Gas and coal prices are close to record levels in Asia and Europe. Stocks of both fuels are disconcertingly low in big economies such as China and India; power cuts, already a problem in China, may spread. Rising energy costs will exert more upward pressure on inflation and further darken the economic mood worldwide.

Other costs are rising too: shipping rates have soared, because of a shift in consumer spending towards goods and covid-related backlogs at ports. Workers are enjoying greater bargaining power this year, as firms facing surging demand struggle to attract sufficient labour. Unions in Germany, for instance, are demanding higher pay; some workers are going on strike.

Stagflationists see another similarity with the past in the current policy environment. They fret that macroeconomic thinking has regressed, creating an opening for sustained inflation. In the 1960s and 1970s governments and central banks tolerated rising inflation as they prioritised low unemployment over stable prices. But the bruising experience of stagflation helped shift thinking, producing a generation of central bankers determined to keep inflation in check. Then, after the global financial crisis and a period of deficient demand, this single-minded focus gave way to greater concern about unemployment. Low interest rates weakened fiscal discipline, and enabled vast amounts of stimulus during 2020. Now as in the 1970s, the worriers warn, governments and central banks may be tempted to solve supply-side problems by running the economy even hotter, yielding high inflation and disappointing growth.

These parallels aside, however, the 1970s provide little guidance to those seeking to understand current troubles. To see this, consider the areas where the historical comparison does not hold. Energy and food-price shocks typically worry economists because they could become baked into wage bargains and inflation expectations, causing spiralling price rises. Yet the institutions that could underpin a new, long-lived era of labour strength remain weak, for the most part. In 1970 about 38% of workers across the oecd, a club of mostly rich countries, were covered by union wage bargains. By 2019, that figure had declined to 16%, the lowest on record.

Cost-of-living adjustments (cola), which automatically translate increases in inflation into higher pay, were a common feature of wage contracts in the 1970s. But the practice has declined dramatically since. In 1976 more than 60% of American union workers were covered by collective-bargaining contracts with cola provisions; by 1995, the share was down to 22%. A paper published in 2020 by Anna Stansbury of Harvard and Mr Summers argued that a secular decline in bargaining power is the “major structural change” explaining key features of recent macroeconomic performance, including low inflation, notwithstanding the decline in unemployment rates over time. As dramatic as the pandemic has been, it seems unlikely that such a big shift has reversed so quickly.

Moreover, stagflation in the 1970s was exacerbated by a sharp decline in productivity growth across rich economies. In the decades after the second world war, governments’ commitment to maintaining demand was accommodated by rocketing growth in productive capacity (the French called the period “les Trente Glorieuses”). But by the early 1970s the long productivity boom had run out of steam. The habit of stoking demand failed to help expand productive potential, and pushed up prices instead. What followed was a long period of disappointing productivity growth.

Since the worst of the pandemic, however, productivity has strengthened: output per hour worked in America grew at about 2% in the year to June, roughly double the average rate of the 2010s. Booming capital spending could mean such gains are sustained.

Another important break with the 1970s is that central banks have neither forgotten how to rein in inflation nor lost their commitment to price stability. In the 1970s even some central bankers doubted their power to curb wage and price increases. Arthur Burns, then the chairman of the Federal Reserve, reckoned that “monetary policy could do very little to arrest an inflation that rested so heavily on wage-cost pressures”. Research by Christina and David Romer of the University of California at Berkeley suggests that Mr Burns’s view was a common one at the time. But the end of the era of high inflation demonstrated that central banks could rein in such price rises, and this knowledge has not been lost. Last month Jerome Powell, the Fed’s current chairman, declared that, if “sustained higher inflation were to become a serious concern, we would certainly respond and use our tools to assure that inflation runs at levels that are consistent with our longer-run goal of 2%.”

The new fiscal orthodoxy likewise has its limits. Budget deficits around the world are forecast to shrink dramatically from this year to next. In America moderate Democrats’ worries about excessive spending may mean that President Joe Biden’s grand investment plans are pared down—or fail to pass at all.

What next for the world economy, then, if it does not face a 1970s re-run? Rocketing energy costs pose a serious risk to the recovery. Soaring prices—or shortages, if governments try to limit rises—will dent households’ and companies’ budgets and hit spending and production. That will come just as governments withdraw stimulus and central banks countenance tighter policy. A demand slowdown could relieve pressure on supply-constrained sectors: once they have paid their eye-watering electricity bills, Americans will be less able to afford scarce cars and computers. But it would add a painful coda to nearly two years of covid-19.

Another important respect in which the global economy has changed since the 1970s is in its far greater integration through financial markets and supply chains; trade as a share of global gdp, for instance, has more than doubled since 1970. The uneven recovery from the pandemic has placed intense stress on some of the ties binding economies together. Panicking governments could hoard resources, causing further disruption.

Past experience, therefore, is not the clearest lens through which to view the forces buffeting the global economy. The world has changed dramatically since the 1970s, and globalisation has created a vast network of interdependencies. The system now faces a new, unique test. ■

For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.

An early version of this article was published online on October 5th 2021

Per noi è fonte di sostentamento: e per questo, il mercato finanziario noi di Recce’d lo trattiamo sempre con rispetto, massimo rispetto, ed in modo molto serio.

Per operare in modo profittevole sul mercato finanziario, però, è importante, ed anzi deciso, riconoscere anche i (pochi, ma ricorrenti) aspetti del suo funzionamento che risultano tutt’altro che seri: risultano al contrario ridicoli.

Molti esempi, li abbiamo evidenziati nel corso degli ultimi dieci anni nel nostro Blog. Oggi, ve ne propioniamo un ennesimo.

Richiamiamo la vostra attenzione sul tema delle “materie prime 2021”, ed in particolare sul tema del “petrolio 2021”.

Il tema è caldo, anzi caldissimo: tutti i media ci si buttano a pesce, sapendo che aumenta il numero di click, e questo perché dal petrolio si ricavano beni di uso comune, come benzina, gasolio e carburanti per il riscaldamento domestico.

L’immagine qui vicino è una recentissima copertina del settimanale The Economist, ma anche sui quotidiani e TG nazionali i termini “shock energetico” sono di uso comune.

Qualcuno avrà fatto i conti? Qualcuno avrà aggiornato le previsioni? E su che cosa? E chi? Qualcuno, almeno qualcuno, avrà idea di che cosa si sta esaminando, di che cosa si parla?

Boh.

Recce’d la settimana scorsa, nel proprio quotidiano The Morning Brief, ha fornito al proprio Cliente una serie ordinata e selezionata di dati concreti, in particolare sul petrolio.

Poi ha spiegato nel dettaglio al Cliente, con riferimento alle nostre attuali posizioni di portafoglio, perché questo allarme sullo “shock energetico”, benché preso in modo molto serio, non modifica le nostre scelte di portafoglio.

In questo Post, in modo molto più sintetico, vogliamo regalare ai lettori un aiuto concreto: vogliamo aiutare i lettori a rispondere alla domanda “Che cosa cambia nella gestione del mio portafoglio con il petrolio a 80$?”

Prima di tutto, e come facciamo sempre, vogliamo aiutare il lettore a ricordare: vogliamo aiutare i nostri lettori a ricordare che negli ultimi cinque anni le oscillazioni del prezzo del petrolio sono state molto frequenti e molto ampie in assoluto (dollari) ed in percentuale (50-60-70%). Lo vedete sotto nel grafico.

Non c’è nulla di singolare, di unico, di “senza precedenti” nel recente rialzo del prezzo del petrolio greggio. Se soffrite di ansie da volatilità, tenetevi alla larga, o se siete almeno un po’ equilibrati, limitate la vostra esposizione.

Sempre richiamando in causa la vostra memoria, riguardatevi il grafico dell’oro qui sotto.

Tornate con la memoria a 12 mesi fa: ricordate? Ogni dubbio era svanito, e tutto era chiarissimo: l’oro avrebbe potuto … soltanto salire.

Come il petrolio oggi.

Ritornando per un attimo all’oro: vi sarà utile ricordare anche un po’ più indietro, e guardare qui sotto il grafico di lungo periodo.

Le materie prime hanno, tutte, un utile effetto, che potremmo dire da “equilibratore” ovvero “ammortizzatore” nei vostri portafogli. ma attenzione: non sono un Bancomat. proprio quando credete “adesso lo so, che guadagno”, loro scattano nella direzione opposta. Un investitore VINCENTE lo sa che è necessaria pazienza, se si vogliono fare veri guadagni.

E qui arriviamo al ridicolo, ovvero a quei momenti ridicoli dei mercati finanziari, e soprattutto di chi opera sui mercati ed intorno ai mercati.

Sui mercati ed intono ai mercati, da sempre, c’è chi spinge sulle materie prime come “occasioni di facili guadagni”, facili e soprattutto veloci.

Basterà avere capito “a che punto è il ciclo”.

Lo scorso mese di maggio, come vedete sopra, era chiaro che un “super-ciclo” delle materie prime, petrolio in testa, era già iniziato. Le ragioni erano evidenti a tutti: stimolo all’economia e dollaro USA debole.

Ora, vediamo: dollaro USA debole, mmmmm …

E poi lo stimolo all’economia, beh …. mmmmm … vediamo, dunque …

Ma allora era comunque chiaro a tutti: persino a settimanali autorevoli come The Economist.

Nel mese di agosto, e quindi due mesi dopo, i toni vengono in parte moderati: e si scrive, come vedete qui sotto, che “Forse” ma solo forse, il “Superciclo” esiste davvero. Forse.

Poi arriva settembre. Sono trascorsi appena 90 giorni. E cosa accede?

Arriva la triste notizia di un lutto.

Sta morendo, il Superciclo, ci dice il Wall Street Journal.

Che cautamente aggiunge, però, che “Non è detta l’ultima parola”.

Da allora, dalla morte del Superciclo, è trascorso solo un mese. ma chi se ne ricorda? E chissenefrega? Le grandi banche globali, insieme con i TG e i quotidiani, devono spingere qualcuna a fare, qualcuno a aprire nuove posizioni, qualcun altro a chiudere posizioni già in essere, qualcuno almeno a scrivere nella chat oppure mandare un messaggino ad un amico oppure fare click sul sito.

Fare, fare, fare. come se stesse davvero succedendo qualcosa.

E così arriviamo ad oggi. Il petrolio WTI tratta a 82 dollari USA, ed è chiaro che può andare in una sola direzione, e per quali ragioni (ah, no, non il dollaro debole, e no, neppure il boom economico) … e fesso chi non c’era.

Per nostra fortuna, noi in Recce’d abbiamo sufficiente esperienza, e nervi saldi, per leggere questi episodi per quello che sono nella realtà. Episodi dell’avanspettacolo, poi arriverà lo spettacolo quello vero.

Intanto voi, amici lettori, tenetevi questo Post in memoria: ne riparleremo sicuramente, come sempre facciamo, ritornando sui nostri Post, anche di anni prima. Lo facciamo anche oggi, negli altri due Post con la medesima data.

Solo così si vince, nel gioco degli investimenti. Non rincorrendo i titoli dei siti e dei quotidiano, come quelli che a campione vi abbiamo riportato nel nostro Post. Investire è una cosa seria, più seria di questi titoli: che sono solo … pinzellacchere.

In questo ottobre del 2021, è utile ed opportuno farsi delle domande.

In particolare, per tutti gli investitori, è arrivato il momento di chiedersi che cosa non ha funzionato. E se c’è mai stata, davvero, la possibilità ragionevole che potesse funzionare. Oppure se abbiamo assistito ad una ubriacatura collettiva, come accade la notte del Capodanno.

In questo ottobre 2021, un mese nel quale tutti voi lettori leggete sul quotidiano di preferenza che l’economia rallenta, l’inflazione aumenta, e siamo destinati alla stagflazione, è diventato inevitabile chiedersi che cosa non ha funzionato, di una manovra di politica economica (fiscale e monetaria) che solo qualche mese fa prometteva “boom della crescita” e benessere economico per un tempo illimitato.

Ricordiamolo: negli Stati Uniti, le nuove risorse messe a disposizione dalla politica monetaria (Federal Reserve) e politica fiscale hanno raggiunto, sommate, il 25% del PIL annuale di quella economia. A pochi mesi di distanza, siamo tutti qui a ragionare di una crescita al 2%. Se va tutto bene.

Qualcosa non è andato come previsto. Almeno, come era stato previsto dalle banche globali di investimento e dalla totalità dei promotori finanziari, dei wealth managers, dei private bankers, dei consulenti addetti alla vendita.

Recce’d, al contrario, nell’agosto 2020 aveva illustrato, anche in questo Blog, le ragioni per le quali si andava già allora verso uno scenario di stagflazione.

Noi restiamo del parere che sia questa, l’essenza del nostro lavoro: gestire il portafoglio dei Clienti sulla base di quello che, di lì a poco, succederà nella realtà dei fatti: senza lasciarsi trascinare dalle mode che prevalgono in quel momento sui mercati finanziari.

L’illusione di ricchezza per tutti ed a costo zero, creata da politiche economiche poco ragionate e mal calcolate, che si stanno manifestando per quelle che sono, ovvero dannose per l’economia, mettono in pericolo la stabilità dei mercati finanziari ed anche il benessere finanziario di ogni singola famiglia.

La ricchezza ed il benessere, infatti, non possono essere “creati per decreto”, ed i valori sui mercati finanziari non possono essere fatti “salire per legge”. Siamo, e saremo forse in futuro, tutti più ricchi unicamente nel caso in cui i soldi che noi andiamo ad investire produrranno nel futuro un miglioramento della situazione sottostante, della realtà dell’economia.

In questo specifico caso, del post-pandemia, non è andata così e non andrà così: tutta la ricchezza che è stata “creata dal Parlamento” verrà inevitabilmente cancellata dalla realtà dei fatti: tutto quello che resta, già oggi, è una ricchezza di carta, come quella dello Zio Paperone.

La consapevolezza di questo stato di cose ormai la trovate in prima pagina su tutti i quotidiani, e ne sentite parlare in televisione al TG Economia.

Un esempio ve lo forniamo qui sotto, dove leggete un titolo di un articolo pubblicato la settimana scorsa dal quotidiano Wall Street Journal, che parla di “ripresa economica messa in pericolo dai problemi nella catena di produzione globale”.

Il fatto notevole, per noi investitori, è che si possa legittimamente affermate che “la ripresa economica viene messa in pericolo” a pochi mesi di distanza dai titoli sul “boom economico”, che anche il quotidiano in questione, come ogni altro quotidiano, aveva ripetutamente utilizzato fino a poche settimane fa.

A voi, amici lettori ed amici investitori, risulta credibile il fatto che nssuno, al mondo, ci avesse pensato in agosto? Luglio? Giugno? Maggio? O anche prima?

Nessuno, con l’eccezione di noi di Recce’d: vi pare credibile?

Cosa è, che non è andato come previsto? Come venivano fatte, le previsioni solo qualche settimana fa? E soprattutto: quali interessi andavano ad alimentare, quelle previsioni di “felicità eterna” che dominavano sui mercati finanziari fino a qualche settimana fa?

Questa, detta in estrema sintesi, è la ragione per la quale ogni investitore dovrebbe chiedersi “che cosa non ha funzionato”. Comprendere le ragioni che ci hanno portato a questa situazione è essenziale, se vi interessa (e dovrebbe interessarvi) di comprendere come la situazione potrà evolversi, da oggi in poi.

Il suggerimento di Recce’d è il seguente: andate a cercarvi l’articolo del Wall Street Journal, che vedete citato nell’immagine più in alto, e che qui noi no riportiamo per ragioni di spazio in questo Post.

Leggete con attenzione quell’articolo, e poi leggete subito dopo l’articolo che segue, che noi abbiamo trovato nel settimanale The Economist. Il settimana ha scelto di etichettare lo stato attuale dell’economia come “shortage economy”, l’economia del razionamento. sarà proprio questo, il futuro che ci attende?

La lettura combinata dei due articoli vi sarà utile per comprendere in che modo la situazione delle economia si modificherà e si evolverà nei prossimi mesi.

Una volta completata questa lettura, avrete le idee molto più chiare: noi di Recce’d più in basso riprendiamo l’analisi delle implicazioni di questa “shortage economy” per gli investimenti e per la gestione del portafoglio titoli.

For a decade after the financial crisis the world economy’s problem was a lack of spending. Worried households paid down their debts, governments imposed austerity and wary firms held back investment, especially in physical capacity, while hiring from a seemingly infinite pool of workers. Now spending has come roaring back, as governments have stimulated the economy and consumers let rip. The surge in demand is so powerful that supply is struggling to keep up. Lorry drivers are getting signing bonuses, an armada of container ships is anchored off California waiting for ports to clear and energy prices are spiralling upwards. As rising inflation spooks investors, the gluts of the 2010s have given way to a shortage economy.

The immediate cause is covid-19. Some $10.4trn of global stimulus has unleashed a furious but lopsided rebound in which consumers are spending more on goods than normal, stretching global supply chains that have been starved of investment. Demand for electronic goods has boomed during the pandemic but a shortage of the microchips inside them has struck industrial production in some exporting economies, such as Taiwan. The spread of the Delta variant has shut down clothing factories in parts of Asia. In the rich world migration is down, stimulus has filled bank accounts and not enough workers fancy shifting from out-of-favour jobs like selling sandwiches in cities to in-demand ones such as warehousing. From Brooklyn to Brisbane, employers are in a mad scramble for extra hands.

Yet the shortage economy is also the product of two deeper forces. First, decarbonisation. The switch from coal to renewable energy has left Europe, and especially Britain, vulnerable to a natural-gas supply panic that at one point this week had sent spot prices up by over 60%. A rising carbon price in the European Union’s emissions-trading scheme has made it hard to switch to other dirty forms of energy. Swathes of China have faced power cuts as some of its provinces scramble to meet strict environmental targets. High prices for shipping and tech components are now triggering increased capital expenditure to expand capacity. But when the world is trying to wean itself off dirty forms of energy, the incentive to make long-lived investments in the fossil-fuel industry is weak.

The second force is protectionism. As our special report explains, trade policy is no longer written with economic efficiency in mind, but in the pursuit of an array of goals, from imposing labour and environmental standards abroad to punishing geopolitical opponents.

This week Joe Biden’s administration confirmed that it would keep Donald Trump’s tariffs on China, which average 19%, promising only that firms could apply for exemptions (good luck battling the federal bureaucracy). Around the world, economic nationalism is contributing to the shortage economy. Britain’s lack of lorry drivers has been exacerbated by Brexit. India has a coal shortage in part because of a misguided attempt to cut imports of fuel. After years of trade tensions, the flow of cross-border investment by companies has fallen by more than half relative to world gdp since 2015.

All this might seem eerily reminiscent of the 1970s, when many places faced petrol-pump queues, double-digit price rises and sluggish growth. But the comparison gets you only so far. Half a century ago politicians got economic policy badly wrong, fighting inflation with futile measures like price controls and Gerald Ford’s “whip inflation now” campaign, which urged people to grow their own vegetables. Today the Federal Reserve is debating how to forecast inflation, but there is a consensus that central banks have the power and the duty to keep it in check.

For now, out-of-control inflation seems unlikely. Energy prices should ease after the winter. In the next year the spread of vaccines and new treatments for covid-19 should reduce disruptions. Consumers may spend more on services. Fiscal stimulus will wind down in 2022: Mr Biden is struggling to get his jumbo spending bills through Congress and Britain plans to raise taxes. The risk of a housing bust in China means that demand could even fall, restoring the sluggish conditions of the 2010s. And an investment boost in some industries will eventually translate into more capacity and higher productivity.

But make no mistake, the deeper forces behind the shortage economy are not going away and politicians could easily end up with dangerously wrong-headed policies. One day, technologies such as hydrogen should help make green power more reliable. But that will not plug shortages right now. As fuel and electricity costs rise, there could be a backlash. If governments do not ensure that there are adequate green alternatives to fossil fuels, they may have to meet shortages by relaxing emissions targets and lurching back to dirtier sources of energy. Governments will therefore have to plan carefully to cope with the higher energy costs and slower growth that will result from eliminating emissions. Pretending that decarbonisation will result in a miraculous economic boom is bound to lead to disappointment.

The shortage economy could also reinforce the appeal of protectionism and state intervention. Many voters blame empty shelves and energy crises on the government. Politicians can escape responsibility by excoriating fickle foreigners and fragile supply chains, and by talking up the false promise of boosting self-reliance. Britain has already bailed out a fertiliser plant to maintain the supply of carbon dioxide, an input for the food industry. The government is trying to claim that labour shortages are good, because they will raise economy-wide wages and productivity. In reality, putting up barriers to migration and trade will, on average, cause both to fall.

The wrong lessons at the wrong time

Disruptions often lead people to question economic orthodoxies. The trauma of the 1970s led to a welcome rejection of big government and crude Keynesianism. The risk now is that strains in the economy lead to a repudiation of decarbonisation and globalisation, with devastating long-term consequences. That is the real threat posed by the shortage economy. 

Ritorniamo adesso alla domanda che apriva il nostro Post: che cosa è, che non ha funzionato? Semplicemente, non ha funzionato la politica economica adottata in risposta alla pandemia.

Ci sono almeno due millenni di storia, a dimostrare che mettere in circolazione più moneta NON fa stare meglio l’economia e NON rende più ricchi tutti quanti a costo zero.

Non esiste, un modo di rendere più ricchi tutti quanti a costo zero: l’intera storia dell’economia insegna che la ricchezza dei popoli è aumentata grazie alla scoperta di nuove risorse naturali ed all’aumento della produttività.

La quantità di moneta in circolazione non ha mai cambiato, né mai cambierà, la realtà dei fatti.

Lo spiega in modo perfetto la lettura che chiude il nostro Post: in questo articolo si parla, a nostro giudizio correttamente, di “uno shock strutturale e secolare” che ha nulla a che vedere con il ciclo economico e che non sarà risolto da politiche del tipo “regaliamo più soldi a tutti”.

Recce’d aveva scritto, come abbiamo ricordato in più occasioni, già nell’agosto 2020: chi allora decise di seguire le nostre indicazioni oggi può guardare al futuro con serenità, ottimismo e prospettive di guadagno molto sostanziose.

Ma soprattutto ha ben compreso la fondamentale differenza tra i “guadagni di carta” ed i “guadagni che restano” nella gestione del proprio portafoglio di investimenti.

Per tutti gli altri, che tra gennaio e giugno si sono fatti attirare come le falene dalla luce di una candela, adesso è probabilmente troppo tardi.

Perché siamo già oltre: tutto ciò che leggete in questo Post è il presente, ed il passato. Ma un buon investitore deve sapere guardare sempre al futuro. Alla prossima fase, quella che sta per iniziare.

Coming out of the 2008 global financial crisis, it took too many too long to recognize that the economic shock was more structural and secular rather than cyclical. The result was a policy response that, while effective in dealing with the immediate emergency, proved insufficient for longer-term economic well-being.

Covid-19 has amplified the vulnerabilities of the disappointing recovery that followed, particularly when it comes to socioeconomic inequalities, co-opted institutions and distorted financial markets. Meanwhile, what took too long to happen a decade ago — recognition that the world faced a structural deficiency of aggregate demand — is now hindering timely responses to the latest challenges.

While demand is much less of a hindrance today because of the historic levels of fiscal transfers and liquidity injections by central banks, Covid-related factors have upended the supply side. The multifaceted efficiency of a just-in-time global economy has become a source of cascading fragilities and disruptions that haven’t yet sufficiently altered mindsets, let alone produced strong policy reactions. Meanwhile, the risks of continuing with pedal-to-the-metal monetary policy outweigh the benefits.

The need to address the content and mix of policies is urgent, both at the national and multilateral levels. Failure to do so could turn stagflationary winds — that disruptive mix of declining growth and higher inflation— into a much more disruptive phenomenon with economic, financial, institutional, political and social implications.

Among its many teachings, the 2008 crisis exposed the dangers of an economy over-reliant on finance. While in the run-up to the crisis policy makers were captivated by innovations that lowered the barriers to debt and leverage, including securitization and other risk-tranching techniques, an unconstrained and unencumbered financial sector went from funding genuine economic opportunities to fueling rampant speculation, most visibly in housing. Balance sheets ballooned as banks also sold a seemingly infinite range of leverage-heavy products to one another.

When it came to dealing with the inevitable consequences — the simultaneous popping of several financial bubbles — policy makers acted quickly to counter the disruptive spillback to the real economy and to rein in excessive risk-taking among banks. The presumption was that a “timely, targeted and temporary” policy intervention would restore conditions for durable socioeconomic prosperity.

Yet what ailed the global economy went deeper than just excessive and irresponsible finance. The “financialization” of the economy itself had sidelined pro-growth initiatives.

Genuine productivity-enhancing activities, such as infrastructure modernization and agile labor enabling and retooling, became boring and old-fashioned compared with what sophisticated financial engineering seemed to unleash. As such, it did not take long for economies to suffer a new normal of disappointing growth, significant inequalities and endless rounds of exceptional central bank interventions to maintain financial stability, albeit of the artificial variety.

With growth repeatedly falling short of what was expected and needed, the initial over-cyclical mindset of many economists and policy makers transitioned to being laser focused on addressing deficient aggregate demand. Unfortunately, Covid has turned this into a weakness given that supply side issues now dominate.

An early economic lesson of Covid is that its drivers of structural fluidity have transformed the efficiency of a just-in-time global economy from a strength into a notable fragility. Tightly woven cross-border supply chains suddenly fell victim to Covid-related closings in one or more ports. Shipping and container disruptions turned cost-effective value chains into loss-makers. Seeking greater resilience, companies have started to rewire their supply chains, amplifying short-term vulnerabilities. It’s hard to quickly build and bring a new production facility on line. It’s even harder when many try to do the same thing at once.

Labor supply has also become an issue. The greater sensitivity of workers to health risks and lifestyle choices alter the propensity to work. Labor force participation has become less secure, fueling record increases in job vacancies. Labor costs inevitably start increasing across-the-board as companies’ efforts to attract new workers force them to also raise pay to retain those they already have.

While the on-the-ground evidence of supply disruptions is multiplying, the dominant macroeconomic mindset is still overly fixated on insufficient aggregate demand. Several of the recent policy remarks by the Federal Reserve serve, once again, as an example.

This will come as no surprise to behavioral scientists. Cognitive traps (rear-view framing, confirmation bias, blind spots, etc.) can slow the shift of policy makers’ focus to supply disruptions, which have become the main cause of the economic malaise of today and tomorrow. Instead, they reinforce some approaches, particularly in monetary policy, that inadvertently amplify the stagflationary winds that are starting to blow across a growing number of countries.

Cognitive biases are particularly problematic at a time of big changes in the operating environment. This was clear in the aftermath of the 2008 financial crisis with the overly cyclical economic mindset that delayed policy responses to what constituted a structural and secular shock several years in the making. We are seeing it today with one that is evolving too slowly from demand to supply.

The longer it takes for national and multilateral policy mindsets to adjust, the more likely we are to repeat the disappointment of the global financial crisis: Winning the war against the immediate enemy but failing to establish the peace of durable and inclusive socioeconomic prosperity, a platform for addressing dangerous secular challenges such as climate change, and anchoring genuine financial stability

Un anno fa, in questo Blog, noi di Recce’d abbiamo scritto “Fight The Fed”. Un anno dopo, si leggono messaggi twitter come quello che leggete qui sopra, scritto da un notissimo gestore di portafoglio, dove si afferma che la Federal Reserve per uscire dalla scomodissima situazione nella quale si trova oggi “ha bisogno di una crisi finanziaria”.

Ma soprattutto, ed è la ragione per la quale ci siamo decisi a scrivere questo Post, adesso nell’ottobre 2021 lo dice … persino la stessa Federal Reserve.

Essendo che una crisi finanziaria a moltissimi dei lettori di questo Post (non ai nostri Clienti) farebbe perdere tanti soldi, il tema merita la massima attenzione da parte dei nostri lettori. Molti tra i quali proprio non hanno capito che oggi la Federal Reserve è il principale nemico del loro benessere finanziario.

Molti tra i nostri lettori non lo hanno ancora capito: ed una parte importante di questi non intende proprio capirlo. Non vuole sentire: si sente di avere “diritto alla felicità” e non vuole vedere, assolutamente, la realtà intorno.

A questi lettori sognatori farà bene leggere l’articolo che segue. Perché … adesso anche la Federal Reserve dice “Fight the Fed"!”.

Nell’articolo si racconta che la stessa Federal Reserve, nelle scorse settimane, ha pubblicato un documento che critica le scelte della Federal Reserve post pandemia, e lascia quindi intravedere non soltanto l’esistenza di un conflitto interno alla Fed (che è cosa nota) ma pure un possibile cambio di strategia nella gestione della politica monetaria USA.

Cambio che, se si realizzasse, prenderebbe il mercato del tutto di sorpresa: come già accadde, ma nella direzione opposta, nel gennaio 2019, e quindi poco più di due anni fa.

Vi lasciamo alla lettura per poi procedere più in basso con uno sguardo verso il futuro.

It seemed last week that the Federal Reserve may have avoided a taper tantrum when it signaled that an announcement on the slowing of the rate of bond purchases may come as soon as November, with the buying stopping altogether by the middle of 2022.

The typical market reaction didn’t happen—the yield curve actually flattened at first. Even when that reversed and yields began to jump, stocks were unaffected. That all changed Tuesday, as the technology-heavy Nasdaq Composite tumbled 2.8% on its worst day since March and the S&P 500 declined 2%.

So is this a delayed taper tantrum? It might seem that way, but there’s plenty more going on. Investors are becoming increasingly worried about inflation, particularly in light of surging energy prices, and the prospect of rising interest rates. The Fed now sees the first rate increase next year, while St. Louis Fed President James Bullard said Tuesday there could be two increases in 2022.

There’s also just a lot of uncertainty. Global concerns over the China Evergrande situation may have eased but the crisis has yet to be resolved. There’s the issue of the U.S. debt ceiling, a potential government shutdown, and the question marks over Fed Chair Jerome Powell’s second term were catapulted back into focus Tuesday as Sen. Elizabeth Warren (D., Mass.) said she would oppose Powell’s renomination, calling him a “dangerous man” for making the banking system less safe.

It could also be a dangerous time for investors. The 10-year yield, in the 2013 tantrum, took about seven months to peak.

—Callum Keown

A day after Federal Reserve Chair Jerome Powell said at a press conference that “inflation expectations are terribly important,” Jeremy Rudd, a senior Fed economist who has served at the central bank since 1999, released a new paper.

The title: “Why Do We Think That Inflation Expectations Matter for Inflation? (And Should We?)” His answer to the parenthetical question was a resounding no.

Fed watchers had varying interpretations of Rudd’s paper. Some saw it as validating the new policy framework around inflation, which aims for observed price growth that modestly overshoots 2% for some time rather than making decisions based on potentially erroneous forecasts. Others viewed it as a warning: Counting on surveys that show stable longer-term inflation expectations runs the risk of missing a real-time regime shift in the economy. 

The summary of the paper creates room for reading between the lines. “Economists and economic policymakers believe that households’ and firms’ expectations of future inflation are a key determinant of actual inflation,” it says. “This belief rests on extremely shaky foundations, and a case is made that adhering to it uncritically could easily lead to serious policy errors.”

It’s not until Page 16 that Rudd lays out the practical and policy implications of his argument. Once he does, it’s hard not to read it as expressing doubt about the Fed’s new policy framework and advocating for vigilance and humility about understanding what might be in store for the U.S. economy. The analysis comes at a critical time for the central bank: On Monday, both Boston Fed President Eric Rosengren and Dallas Fed President Robert Kaplan said they would retire within the next two weeks.

This is what Rudd suggests on monitoring for evidence of an inflation regime shift:  

“One development to watch for would be any evidence that a renewed concern with price inflation was starting to affect wage determination — either in statistical form ... or in the form of anecdotes. To the extent possible, we might also try to determine whether quit rates were starting to rise in a manner that was less tied to the state of the labor market and more correlated with consumer price developments, or whether wage increases for new hires were starting to rise appreciably relative to wage increases for workers in continuing employment relationships (the argument being that wages for new hires are more flexible and hence more responsive to economic conditions).”

Yes, the shocks from the Covid-19 pandemic have made parsing economic data trickier than ever. But the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, shows that the quits rate remains near a record high at 2.7%. The number of job openings in the U.S. exceeded hires by 4.3 million in July, the most in data going back to 2000. Employees clearly hold the cards — anecdotes abound about businesses scrambling to offer higher wages and one-time bonuses, laying the foundation for the disparity between new employees and existing workers that Rudd highlighted. For now, this is a welcome change, given the power dynamics have favored employers over the past few decades.

Should the quits rate stay elevated for many more months, however, it might raise concern that cost-of-living increases are starting to become front and center in the minds of workers. As my Bloomberg Opinion colleague Noah Smith wrote earlier this month, even though U.S. wages have been rising strongly as of late, on an inflation-adjusted basis, they’re lower than they were in May 2020.

Powell, for his part, said last week that “inflation expectations had drifted down, and it was good to see them get back up a bit.” That was in response to a question about a New York Fed survey, which showed Americans’ median expected inflation rate over the next three years is 4%, the highest ever in data going back to 2013. According to Rudd’s analysis, central bankers’ attempts to influence these kinds of forecasts are a waste of time at best — and dangerous at worst:

It is far more useful to ensure that inflation remains off of people’s radar screens than it would be to attempt to “reanchor” expected inflation at some level that policymakers viewed as being more consistent with their stated inflation goal. In particular, a policy of engineering a rate of price inflation that is high relative to recent experience in order to effect an increase in trend inflation would seem to run the risk of being both dangerous and counterproductive inasmuch as it might increase the probability that people would start to pay more attention to inflation and—if successful—would lead to a period where trend inflation once again began to respond to changes in economic conditions.

Rudd also adds that by assuming inflation expectations are what ultimately drives price growth, “the illusion of control is arguably more likely to cause problems than an actual lack of control.” He warns that “given the huge boon to stabilization policy that results from a stable long-run inflation trend, actions that might jeopardize that stability would appear to face an unusually high cost-benefit hurdle.”

To be clear, the Fed wants to talk a big game on inflation and push expectations higher because policy makers believe that will keep price growth above their 2% target. Rudd argues that:

1. Inflation expectations are relatively meaningless.

2. Policy makers should strive to keep inflation off people’s radar.

3. Engineering above-target inflation risks being dangerous and counterproductive.

“I view Rudd’s policy implications as an indictment of the Fed’s new policy framework,” Tim Duy, a former Bloomberg Opinion contributor who’s now chief U.S. economist at SGH Macro Advisors, wrote in a report. “There is clearly some internal conflict.”

I wrote last week after the Federal Open Market Committee decision that Powell tried to walk back the central bank’s inflation fear, which was evident in the hawkish shift in the “dot plot.” The sort of questions raised by Rudd’s paper only increase the likelihood that policy makers will be leery of inflation that persistently exceeds 2% and that for all the talk about a “substantially more stringent test” to raise interest rates and the steadfast belief that price growth will be transitory, they’ll react similarly to the way they have in the past. 

Bond traders are grappling with what this all means, judging by recent market moves. Eurodollar futures are now pricing in 34 basis points of rate increases in 2022, up from about 25 basis points a week ago. The Treasury yield curve from five to 30 years experienced a rare bout of bear flattening on Monday — it’s just the third time since mid-June that yields on both tenors increased and the curve flattened. That could be seen as investors betting the Fed will raise interest rates in the coming years to avoid inflation that’s too hot.

When Powell revealed the Fed’s shift in strategy in August 2020, his argument went like this: “Inflation that runs below its desired level can lead to an unwelcome fall in long-term inflation expectations, which, in turn, can pull actual inflation even lower, resulting in an adverse cycle of ever-lower inflation and inflation expectations. This dynamic is a problem because expected inflation feeds directly into the general level of interest rates.”

Rudd’s paper calls this whole premise into doubt. The main question investors should be asking: Is inflation high enough to affect Americans’ employment and purchasing decisions? As long as price pressures remain front and center for consumers, the risk remains that Fed officials will be late to notice a structural shift happening right in front of them.

La maggior parte degli investitori nel 2020 ha commesso il medesimo errore. che è quello di pensare che “le cose andranno avanti così per sempre” ed operare sui propri portafogli titoli di conseguenza. Il cambiamento di scenario che è intervenuto fra agosto e settembre 2021 li ha tutti colti di sorpresa, e fino ad oggi molti non si sono mossi solo perché terrorizzati.

Altri cambiamenti stanno arrivando, come spiega benissimo qui sotto William Buiter in un articolo per il Financial Times, e questi ulteriori cambiamenti costringeranno tutti a muoversi, a reagire, a proteggersi e quindi a modificare il proprio portafoglio titoli, come dice proprio in chiusura William Buiter..

The combination of extremely low and relatively stable US government bond yields has confounded many market watchers for quite a while now, also challenging traditional economic analyses. This has made the move up in yields over the past couple of weeks particularly notable, raising interesting questions for markets, policies and therefore the global economy. It is usual to characterise US benchmark government bond yields as the most important market indicator in the world.

Traditionally, they have signalled expectations about growth and inflation in the world’s most powerful economy. They have been the basis for pricing in many other markets around the world. Breaking with a long history, these benchmark measures decoupled in recent years from economic developments and prospects. Their longstanding correlations with other financial assets, including stocks, broke down. And their information content became distorted and less valuable.

Coming out of the 2008 global financial crisis, this was attributed to excess global savings that exerted consistent downward pressures on yields. With time, however, it became clear that the main driver was the ample and predictable purchasing of government bonds by the world’s most powerful central banks under quantitative easing programmes, particularly the US Federal Reserve and the European Central Bank. One should never underestimate the power of central banks intervening in market pricing. The trillions of dollars of bonds purchased by the Fed and ECB have distorted the usual two-sided markets and encouraged many to buy a whole range of assets well beyond what they would normally do on the basis of fundamentals. After all, what is more assuring than a central bank with a fully-functioning printing press willing and able to buy assets at non-commercial levels.

Such purchases legitimatise previous private sector investments and provide assurance that there will be ready buyers of assets for those needing to sell to reposition portfolios. It is a set-up that encourages private sector “front-running” of purchases by central banks at prices that would have traditionally been deemed unattractive.

No wonder that even those convinced of a fundamental mispricing have been hesitant to be on the other side of a bond market dominated by central banks. While these factors remain in play, yields have slowly but consistently been migrating up in the past two weeks from 1.30 per cent for the 10-year bond to 1.50 per cent. With global growth prospects damping somewhat due to the Delta variant of Covid-19, the drivers have been a mix of mounting inflationary pressures and multiplying signs that central banks will struggle to maintain the era of “QE infinity” — that is, endlessly ultra loose financial conditions.

The signs in recent days have included statements from the Bank of England and higher rates in Norway adding to moves in some developing countries. The more rate volatility increases, the greater the risk of yields suddenly “gapping” upwards given that we are starting with a combination of very low yields and extremely one-sided market positioning. The greater the gapping, the bigger the threat to market functioning and financial stability, and the higher risk of stagflation — the combination of rising inflation and low economic growth.

Like a ball deeply submerged in water, a combination of market accident and policy mistake could result in a move up in yields that would be hard for many to handle. Importantly, this does not mean that central banks, and the Fed in particular, should delay what should have already started — that is, embarking on the tapering of what, curiously, is the same level of monthly asset purchases ($120bn) as at the height of the Covid-19 emergency 18 months ago.

On the contrary, the longer the Fed waits, the more markets will question its understanding of ongoing inflationary pressures, and the higher the risk of disorderly market adjustments undermining a recovery that needs to be strong, inclusive and sustainable. For their part, investors should recognise that the enormous beneficial impact on asset prices of prolonged central bank yield repression comes with a consequential possibility of collateral damage and unintended consequences. Indeed, they need only look at how hard it has become to find the type of reliable diversifiers that help underpin the old portfolio mix of return potential and risk mitigation.