On the face of it, there isn’t much to smile about this morning…. Any economic snapshot would be bleak indeed.
Citicorp economists predict UK inflation will hit 18.6% in January.
Even as Europe scrambles to build winter reserves, gas prices spiked after Russia announced unscheduled pipeline maintenance – raising fears it won’t be switched back on again. (Imagine building a massive castle to defend Europe, but leaving the water wells in Russia…)
Stocks and Bonds took their first major spanking since mid-July as players panicked about hints of tighter monetary policy to be announced by a hawkish Fed at Jackson Hole later this week. (Which means if Jay Powell gives the merest hint of accommodative policy, there will, no doubt, be a massive relief rally – but let’s see if we make it to Friday first…) Value stocks are an oxymoron.
JP Morgan’s CEO Jamie Dimon has told the bank’s uber-clients there is a greater than 20% chance the US economy is moving into “something worse” than a hard recession – which is a 30% chance. Ouch. He’s thinking about all the obvious easy to spot stuff – interest rates, quantitative tightening, oil, energy, China, Ukraine and War.
What could possibly be worse than a hard recession? I can think of a few things. Ask me again once Liz Truss is in office. I just can’t wait to hear her plans to deal with an uncontrolled chain reaction of rising pay-demands as wage-inflation goes critical, exploding personal and business default rates, surging unemployment and a winter of increasing discontent and power cuts. The likelihood her government will be overwhelmed is high and confidence in her competence is low. She might surprise us – anyone want to take that bet? Thot not.
A chum has already shuttered his manufacturing business – soaring energy costs killed him, but wages, a dearth of available skills, and supply costs meant it just wasn’t worth fighting anymore. Across Europe, businesses – from restaurants to SMEs are simply giving up – beaten down by a howling gale of inflation, energy costs, business bureaucracy and a dearth of anyone prepared to work for peanuts in increasingly marginal looking jobs.
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