The investment landscape and headlines of today would be unrecognizable to someone who fell asleep six months ago and suddenly snapped awake. Financial markets have undergone a tectonic shift that few saw coming. Back in the summer of 2016, the prevailing belief was that central banks were all-powerful and would forever push rates lower in a continuation of policies followed since the crash of 2008. In a show of force, the Bank of England announced a fresh cut to their interest rate to fend off an economic seizure in the face of the Brexit decision, the European Central Bank re-upped quantitative easing, and the Fed was maintaining overnight rates at just above zero.
Evergreen initiated a slightly modified version of its annual forecast EVA just over a year ago. We shifted from specific predictions to attempting to identify developments that could catch the investment community off-guard. As we noted at the time, this was an unabashed imitation of what Blackstone’s Byron Wien has done for years (including when he was Chief US Investment Strategist for Morgan Stanley). However, we also did this because it is the most unanticipated events that have the greatest market impact.
“The more certain something is, the less likely it is to be profitable.”
-JIM ROGERS, acclaimed investor and former partner of George Soros
“You can’t buy what is popular and do well.”
“We don’t see things as they are, we see them as we are.” -ANAIS NIN, essayist
“Education is a civil defense against media fallout.” -MARSHALL MCLUHAN, philosopher
Our partners at Gavekal have long written about the four key quadrants of investing:
1) Inflationary booms (mid-1960s to early 1970s)
2) Inflationary busts (mid-1970 to early 1980s)
3) Disinflationary booms (mid-1980s to late 1990s)
4) Deflationary busts (1930s,
“Most investors are not well-equipped for an analysis of that kind (political risk). They built their careers crunching numbers, not pondering social science.” -The Financial Times’ GILLIAN TETT
“The roughly $275 billion in legal costs for global banks since 2008 translates into more than $5 trillion of reduced lending capacity to the real economy.” -MINOUCHE SHAFIK,