The ‘outside view’ in stock market terms is complex. Interest rates, economic growth, human behaviour, liquidity, valuation levels and a myriad of other variables, play a part. In looking at most of these drivers from a longer term perspective, one thing is obvious. Almost all are at extremes when considered in a long term context. Interest rates have never been lower, economic growth is moribund nearly everywhere, asset prices are high, debt levels are extremely high and market liquidity has generally been deteriorating. Absent any other information, this would suggest it unwise to assign an unusually high probability to the extension of these extremes. However, with markets totally in the thrall of central bankers, this is exactly the current situation. Referring to an amazingly narrow and inaccurate set of variables (inflation, growth) and consisting of participants almost certainly likely to be suffering from ‘group think’, central bankers and interest rates remain the only game in town for investors. Read the full article here: (VIEW LINK)
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