Economics

It isn’t 2008 all over again, but dismissing the broader risks of SVB’s demise would be a mistake for investors, writes Ruffer CIO Henry Maxey.

It is perfectly possible that some inflationary measures fall back through zero, and prices actually deflate in an odd month, says Ruffer chair Jonathan Ruffer. If that happens, the complaisant assumption that inflation will go back to sleep again might look justified – but it will be a false dawn.

Negative-yielding debt topped US$18 trillion at its height in late 2020, representing a quarter of global bonds outstanding at the time. With the stock of negative-yielding bonds now yielding in the positive, owners of the debt face ugly marked-to-market losses – but counter-intuitively, there were investors willing to buy them.

Ever since the GFC interest rates around the world have been on a trajectory to zero, which acted as a proxy tax on investing for retirement for millions. But the current economic is a whole new ball game, writes Drew Meredith.

Housing conditions are tipped to remain soft in the year ahead as central banks continue to raise credit costs, but experts still believe an all-out property market crash is unlikely.

With inflation, interest rate hikes and other economic stress weighing heavily on Australian households, key recent data show consumer sentiment approaching new lows while overall spending continues to climb.

Powerful forces are spooking global economies and pushing investors into safe haven assets like US dollars and US treasuries, and in turn flattening the relative value of our domestic currency.

More rises are likely to come but analysts say a confluence of factors may cap the official rate at around 3.1 per cent in 2023, providing relief to Australian households.

An erosion of trust has changed the investor psyche to one that prefers companies which generate cash profits with a long term focus, according to Schroder’s’ Martin Conlon.

Our record US$350 trillion global debt – the equivalent of 3.5x global GDP – has “tentacles across the world”, says Simplicity author Danielle Ecuyer. Tightening financial conditions further will have significant consequences.

A recession is looking more than likely with the global equities market deteriorating and valuations coming under pressure, says Bell Asset Management.

BCA Research paints a bleak picture of the US economy after conditions deteriorate.