It is typical that late in every financial cycle, central banks are raising rates as demand and global growth are falling until finally central bankers blink and move to cutting rates once more. Different this time: globalization is in a secular retreat while global debt is at record highs and policy rates are less than 2% in North America, Europe, the UK and Japan. All of these factors make it likely that the next recession will be deeper and longer than the last two, despite monetary efforts to intervene.
Building on our earlier slowdown call, the incoming data has made the market begin to acknowledge that the economy is not as strong as expected – that’s the critical backdrop for the market jitters. See: Deglobalization and the Fed.
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