Have we reached peak economy?
As world economies start to bounce back after their COVID-19 lockdowns, inflation is back on the agenda. Federal Reserve Chairman, Jerome Powell, thinks the current spike is transitory. Time will tell if he’s right. But whether it’s transitory or persistent, inflation will impact stock market returns.
Quite simply, persistent inflation will mean central banks will have to apply brakes to their economies and that means a tapering of the fiscal stimulus, monetary stimulus and low interest rates that have fuelled the stock market boom.
In recent weeks we have talked about an expected jump in inflation as economies reopen, labour is re-employed, and vaccines are rolled out.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Ben
:
Hi Rodger
it appears all central banks are in the low interest rate boat ,to offset the enormous devaluation of the US dollar which really the whole system works on.
Australia could probably afford higher interest rates and so could some other countries , while it would obviously strengthen our dollar and the amount of capital flight[not really that large in real terms ]would expose the US dollar.
It has more than halved since 1990
probably why the environment is so hot here at present.