Commentary
The main issue in the economy is that there are two generations of market participants who have only witnessed expansionary policies. That’s why the most pressing question for investors is not where earnings are headed or what the rate of change in economic growth is, but when central banks will pivot.
The Federal Reserve and other big central banks have caused a massive crisis. On the one hand, major central banks’ balance sheets have stayed intact in local currency in 2022, and the path of rate hikes is quite accommodating. Markets, on the other hand, are collapsing. How is this possible? Because central banks believe their actions carry no consequences as there’s a legion of economists who twist facts to say there’s no problem. However, the contrary is true. Markets and politicians are so accustomed to easy money that even the slightest normalization causes havoc around the world….