The US government is pumping money and credit into the economy on a mindblowing scale equated with a war-time splurge. The excuse is that it needs to counter the damage done by the pandemic, but the Biden administration views it as an opportunity to pour money into its favoured interests – voters, welfare, public services.
Commodity prices are surging and there’s the prospect of demand for some natural resources exceeding supplies for years to come. Some leading investment advisers now say that we’re in the early stages of another “super-cycle.”
There are four reasons why international fund managers’ pessimism about Europe could be wrong, argues JP Morgan’s chief market strategist for the region, Karen Ward:
The Pentagon has awarded $30 million to Australia’s Lynas – the world’s leading specialist outside China in mining rare earths – to develop a processing facility in Texas.
Prices of commodities are surging despite the fact that economies, many of them still in the grip of lockdowns, are still far from full recovery from the pandemic.
War risk is “consistently underestimated by money people” says FT commentator John Dizard following the escalation of tensions between China and Taiwan. The latter runs itself as a highly successful independent nation, but China insists it is a breakaway province that it is determined to recover.
In Germany the harsh winter has conveyed dramatic warning of how nasty life will become as it proceeds with its extreme Energiewende policy to rely on renewables to meet its electricity needs.
The first thing most people look at when considering an investment is the annual rate of return they expect to be able to make out of it. Return is the “rent” you enjoy as payment for investing your capital rather than going out and spending it, and also the “reward” for the risk you take.
Longer-term forces are stacking up against the world’s reserve currency, says the FT’s Michael Mackenzie. The dollar has been falling for several months in trade-weighted terms under pressure from increasing trade and budget deficits, with expectations that ultra-lo w interest rates are set for an extended stay.
Those of us who have been around long enough know something about booms and busts (I was lucky enough to choose to exit the dotcom mania on the day the market peaked). So, is this the right time to flee the share markets? Not yet. I agree with Eoin Treacy that although “there is clear evidence a mania is evolving… there is no evidence it has reached its peak.”
