Headline: Markets are braced for a global downturn
Sub-headline: The signals from bonds, currencies and commodities are increasingly alarming
Its almost as if American Television’s dreck merchant Aaron Spelling had reincarnated as a writer or writers for the Economist. The opening paragraph, of this essay, is awash in the kind of tarted up melodrama Aaron made his trademark. But this time delivered in the almost plumy Oxbridger patois.
Looking for meaning in financial markets is like looking for patterns in a violent sea. The information that emerges is the product of buying and selling by people, with all their contradictions. Prices reflect a mix of emotion, biases and cold-eyed calculation. Yet taken together markets express something about both the mood of investors and the temper of the times. The most commonly ascribed signal is complacency. Dangers are often ignored until too late. However, the dominant mood in markets today, as it has been for much of the past decade, is not complacency but anxiety. And it is deepening by the day.
The concluding paragraph after all the gloom in its near perfect expression, comes this almost caution, or just its politically useful simulacrum, shaded with a canny cynicism.
When people look back, they will find plenty of inconsistencies in the configuration of today’s asset prices. The extreme anxiety in bond markets may come to look like a form of recklessness: how could markets square the rise in populism with a fear of deflation, for instance? It is a strange thought that a sudden easing of today’s anxiety might lead to violent price changes—a surge in bond yields; a sideways crash in which high-priced defensive stocks slump and beaten-up cyclicals rally. Eventually there might even be too much exuberance. But just now, who worries about that?