Crash preparation

Given that many believe we are entering a new part of the economic and market cycle, which will include interest rate rises, energy crises, supply side problems and so forth, it is worth asking the following question: are fund boards better prepared for what might lay ahead than many of them were in 2008?
It is rarely if ever what is preoccupying markets that causes them to crash. At the moment that is the threat of inflation and the concern that central banks, having allowed it to take off, will have to apply the breaks pretty sharply before long. That could mean some unexpectedly steep rises in interest rates. It is worth noting that the annual inflation rate in the US edged up to a 13-year high of 5.4% in September.

The US, along with many other countries, is suffering from the supply-side crisis. That would well have a nasty impact on the inflation rate. We have come a long way from the talk of negative interest rates, which seemed to be everyone’s concern, not much more than a year ago.

To read more on this story see the Sept-Oct issue of The NED.