I’m starting the New Year wondering if the Malicious Market Gods have launched the planet on to a new more vomit-inducing loop of the rollercoaster?

It feels like we’ve become anaesthetised and insensitive to shock.. The bizarre has become normal and we simply shrug it things that would have seem impossibly improbable just a few years ago. We forget the lessons of the past – thus are doomed to repeat them. I can’t fathom some of the headlines: Bitcoin soared to $34500 on the third day of the new year, and proponents snake-oil salesmen sagely proclaiming it’s headed for $100k by year end. Donald Trump is still plotting to hold the White House, yet Republicans still support him. Brexit got done but didn’t. The ECB is going to focus on climate change. And markets look set to rise and rise and rise and rise….

Whoa.  Hand me a bottle of common sense….

The end of the old year and the beginning of the new is the traditional time to address fundamental questions about future returns, risk, value and the economic outlook.  Jan 1st is just another date, and these are concepts investors should be constantly questioning. Everyone is determined that 2021 will be a better year! Which the market takes to mean – going higher…

Boy Scout Time: Be Prepared…

As the narrative develops, the outlook changes. A new time frame leads to an increased danger of confirmation bias, misreading the lessons, and reinforcing false-positive highlights. Which is why I’m concerned the overly rosy market “past performance in 2020” is setting us up for a nasty rash of reality in the coming 12 months.

There you go.. in my very first paragraphs of the New Year I’m sounding bearish! I’m not. I’m merely reminding readers of the possibility that all that glitters is not necessarily gold.

I fully expect 2021 will see a sharp recovery and uptick in global economic activity. Successful vaccination programmes and repressed consumer demand will drive massive discretionary spending, but drive up retail debt to pay for it. Governments will keep their fingers on the fiscal boost button, and the money presses busy, to sustain economies through to the end of the pandemic and beyond. As money seeps into the real economy – which hasn’t happened despite years of QE – inflation is a distinct possibility.

There will be good news, and bad news to balance it. Consequences are inevitable. Reflating the global economy creates new risks that will need to be addressed; the years of too low interest rates, inflation, and mismatched risk returns.

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