Please note the political opinions expressed below are those of the author himself, and do not necessarily reflect the opinions of JP Fund Services AS.
It appears that employment in the U.S. is no longer as buoyant as many expected.
Rate cuts are being demanded – perhaps unnecessarily – and we continue to compare today’s economic figures with those of past years, often without accounting for the differences in today’s environment. That kind of lazy analysis misses what might actually matter.
I understand the old adage: the markets are always right. There’s truth in it – we can only respond to price changes as they come. But changes are often sentiment-driven, and as we know, sentiment can shift overnight.
Right now, everyone is studying the potential impact of interest rate cuts, and rightly so. But the broader concern lies in the loss of jobs and job opportunities – real pressures on the wider economy. Add to that the fact that Western governments keep piling on debt levels that are neither affordable nor prudent, and it’s clear the risks are mounting.
We tend to measure gains in fiat currency terms, but what if we shifted the yardstick? Gold – still the original store of wealth – is up nearly 40% this year. Framed that way, most capital market instruments would look weaker, not stronger.
Of course, we all need to hedge against the coming recession. Each of us will do so according to our own needs, expertise, and risk appetite. But it’s worth remembering: we shouldn’t become overly influenced by those paid to talk about markets, or by those using their airtime to promote products already sitting in their portfolios.
In my view, the real danger doesn’t lie in whether two-year bond yields tick up or down by half a percent. The risk lies in government actions – policies often designed more to secure votes than to ensure economic stability. And if those policies don’t pan out, the cost will be ours to bear. The practice of endlessly kicking the can down the road is running out of road.
Mass immigration is often presented as a major challenge in Western countries. Yet even where governments act, the expected benefits don’t always materialize. Since Trump took office, more than 1.5 million undocumented immigrants have reportedly been removed, and yet this hasn’t translated into stronger employment data. The labor market remains weak, property prices are under pressure as more homes hit the market, and rising claims for benefits are a weekly reminder of economic fragility.
How this can all be framed as “positive” – with a recession looming – that is difficult to justify.
Across Europe, where political and economic policies now diverge more from the U.S. than ever, immigration remains high, jobs are still scarce, and the tax burden on households keeps climbing. The load is unsustainable. France is now on its fifth prime minister in two years, and in the UK, mainstream media are openly discussing the risk of civil war – a notion once dismissed as unthinkable. The major protests planned for this weekend will be telling.
Such political upheaval should, in theory, be separate from markets. But in practice, unrest drains taxpayer resources, crushes small businesses, and dampens consumption – all of which matters.
Yes, many investors will point to AI and high-tech as the growth engines of the last two years. And they’re right – up to a point. But chasing high-tech names only works until it doesn’t. The late-1990s Nasdaq boom ended in a crash that wiped out billions in personal wealth. The same dynamic played out in the late 1920s when heavy investment in “new technologies” – radio and railroads – preceded the Wall Street crash.
History reminds us: we cannot take the present rally for granted. Nor can we blindly trust the talking heads of mainstream media, any more than we can rely on politicians. In truth, my caution extends to everyone with an opinion – including myself.
My message remains unchanged from last year, and the year before: hedging is difficult right now. Portfolios need to be far more diversified, and that means also looking beyond traditional capital markets.
Physical gold has its place. Some Bitcoin is worthwhile – provided it’s held securely in a private wallet, though widespread interest in crypto has cooled recently. Rural real estate and commodities also look attractive, though we must remember: as governments grow more desperate for revenue, property owners could find themselves squarely in the taxman’s sights.
To wrap this up: we must tread carefully. By all means, continue using capital markets for speculation. But don’t hold positions longer than you should just because the talking heads remain bullish. They always are – until they’re not.
The post If the Wheels Are Coming Off the Economy, Why Are We So Positive About Equity Markets? first appeared on JP Fund Services.
The post If the Wheels Are Coming Off the Economy, Why Are We So Positive About Equity Markets? appeared first on JP Fund Services.
The post If the Wheels Are Coming Off the Economy, Why Are We So Positive About Equity Markets? first appeared on trademakers.