Darius sat down with Ash Bennington last week on Real Vision’s Daily Briefing to discuss the probability of a soft landing, the outlook for asset markets, and more.
If you missed the interview, here are three takeaways from the conversation that have significant implications for your portfolio:
1. The Recent Inflection in The Sovereign Fiscal Balance to Nominal GDP Ratio Indicates A Slightly Less Bullish Outlook for Asset Markets
Our models indicate asset markets are becoming less bullish at the margins.
We have seen a notable shift in the Sovereign Fiscal Balance to Nominal GDP Ratio, transitioning from a negative to a positive trend. This shift indicates a reduction in the fiscal stimulus that has previously bolstered the resilience of the US economy.
While these changes signal a more cautious outlook for asset markets at the margins, they do not pose significant concerns at the current juncture.
2. The Probability of A Soft Landing Remains High
Recently, we have witnessed a rebound in productivity growth.
This upswing in productivity is significant because to achieve a soft landing, at least two of the following three conditions are typically required:
- Sustained at-trend or above-trend productivity growth
- Supportive monetary policies from the Federal Reserve
- At-trend or above-trend government expenditures
Encouragingly, all three conditions have been met in recent months, significantly boosting the likelihood of a soft landing. As of now, the outlook remains positive, with few indicators suggesting the GOLDILOCKS regime is likely to change in the short term.
3. Throughout 2024, Strength Across The Major Global Economies May Cause An Upside Surprise in Asset Markets
The latest January Global Composite PMI data indicates a bottoming in the UK, Eurozone, Japan, and Global PMIs, signaling a collective upswing in economic activities across these regions.
Additionally, signs are emerging that point towards potential factors that may lead to growth surprises, which in turn could bolster asset markets vis-a-vis a weakening dollar, enhanced global liquidity, and improved earnings projections.
That’s a wrap!
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