From the monthly archives: July 2017
We are pleased to present below all posts archived in 'July 2017'. If you still can't find what you are looking for, try using the search box.
Markets have made strong upwards progress so far in the year, though unlike in prior years earnings growth is coming through sufficiently strong to keep multiples stable. This is providing some comfort to us though we do wonder how long this EPS spurt can persist. Economic growth is unexciting but at least it is steady and broadly based. Recent data suggests that the US economy may be softening a tad but this is being offset by the pick up in Europe. Equity market valuations remain expensive but are unlikely to come under severe threat whilst conditions remain benign. This does not preclude the possibility of a summer correction and after the recent run, some back filling is now overdue.
We are baffled how interest rates can be maintained at negligible levels as the spare capacity created by the financial crisis appears close to spent. Experience tells us that we should be seeing wage pressure with inflation following on at its heels, though there is scant evidence of this happening. The slow down in productivity is another mystery and although arguably this predates the financial crisis, the scars created by the crisis may have deepened the trend.
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NAIRU is one of those nasty looking acronym beloved by economists. Typically, the concept works very well in theory but has an unfortunate tendency to breakdown as soon as you apply it in the real world. It kinda makes sense that if there is a sufficiently large pool of unused labour in the economy, wage inflation will remain under wraps. Only once that spare capacity is used up do workers have the power to claim higher wages which are in turn passed on in higher prices.
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