Back at the beginning of the year I laid out a few themes for readers and at High Rock we Incorporated those themes into our weekly webinar when we began that series in April.
I have never been one to fall into the trap of economic and market predictions because I know that when you look back at the record of most economists and portfolio managers, there are few who get it right.
Hence the theme to "Expect The Unexpected", because in all likelihood those who make those calls are going to be wrong.
On Tuesday the International Monetary Fund (and there is no shortage of really smart folks in their ranks) lowered there expectations for the global economy (which means that their original estimates were wrong).
click on this table to enlarge it and if you want more info go to:
The point being, that no matter how smart the experts are (or think they are), there are a great deal of forces at work in the global economy beyond the scope of the economic models.
One thing that we do know however, is that the science of human behaviour is significantly altering the economic landscape.
There has been an enormous shift in the mentality of consumers, producers and investors as they have learned to deal with the repercussions of the 2008 financial crisis and "great" recession.
In fact, it may be more of a result of what happened as information technology took hold at the turn of the century.
There is a growing sense of immediacy, a general impatience where results have to be achieved in a significantly shorter time horizon.
So short-term outcomes take priority over long-term objectives.Investors monitor their portfolios daily, CEO's need to get their share prices higher to hold off the shareholder activists and capital moves from one asset to another in search of quick profits.
No wonder there is so much uncertainty in the global economy.
Uncertainty forces decision makers to hold off on making economic decisions: consumers don't consume, producers don't produce, economic growth slows.
Central banks don't like the uncertainty and because they are limited in their ability to affect global economic development to monetary stimulus programs that may or may not be effective if that additional money is not put to work in the economy (but used for share buy-backs to fuel upward share price movement). Then they become reduced to making positive commentary ("cheerleading") to inspire the economic decision makers to get off of the fence.
The US Federal Reserve has been talking about a stronger US economy in the 2nd half of the year, but recent economic data shows that it is not happening according to their outlook. If the latest IMF forecast is worth its salt, the uncertainties are getting bigger not lessening.
Inflation will return when economic growth drives commodity prices higher.
Economic growth will return when investors start to take a longer-term perspective.
Until then, low economic growth, low commodity prices, low inflation, low interest rates and low earnings mean low investment returns.
Scott Tomenson,CIM Managing Partner, Chief Investment Strategist