Just like the weather, the world economy and financial markets go through cycles. Most years, they don’t change suddenly. We get some transition time between the colder and warmer seasons. I fear we may be in an economic transition right now, and it may not be in the direction of the springtime or summer we would prefer. But let’s look at these charts and see what they tell us.
We heard a lot about valuations at my Strategic Investment Conference, and particularly about the “FAANG” stocks that drove much of the recent bull run. Now, only two weeks later, the “F” in that acronym (Facebook) is tumbling, with the others maybe not far behind. That’s a problem for every stock investor, FAANG or otherwise. So today we’ll look at valuations more broadly and then zero in on the social networking issues that are turning more problematic.
It’s been a week and I’m starting to recover from my post-SIC high. It’s a weird feeling. I love SIC, yet processing it all takes time. Imagine one of those brain maps that shows the neurons opening new pathways. That’s what SIC does. It opens connections that I didn’t previously have.
Today, I’m going to recap one of this year’s new speakers, Karen Harris from the Macro Trends Group at Bain & Company. She has done some ground-breaking research on job automation and the future of work. Much like geopolitics, these factors define the parameters in which other trends develop, so I made Karen one of our day 1 lead-off speakers. As you’ll see below, her presentation was even more enlightening than I expected.
I’m going to wrap up our series on the problems of collecting and analyzing data in the first half of this letter, and then I’ll quickly comment on the Trump tariffs.
Today we’ll extend last week’s discussion by considering how twisted inflation data leads to less-than-ideal policies.
Federal Reserve officials like to say their policy course is “data-dependent.” That sounds very cautious and intelligent, but what does it actually mean? Which data and who’s interpreting it? Let’s ask a few questions.
Last week’s turbulence shined a harsh spotlight on the stock market. Appropriately so, if that’s where your investments are. But in the hubbub many investors are missing the deeper and far more urgent bond market issues.
Rarely do we move directly from boom to bust; but when the shift comes, it can develop quite quickly, even though the transition isn’t usually obvious in real time. As I look at the data and talk to my contacts, I’m beginning to conclude that we’re approaching one of those transitional phases. I think we’ll look back at 2018 as an in-between year… from good times to something eventually not so good.
We must next decide what, specifically, a newly formulated GDP should measure and how – and that’s a thornier question than you might think. Today we’ll wrestle with that question and with some of the implications of changing how we measure growth.