Most forecasts can be characterized as rather pessimistic, as far as short- and medium-term expectations are concerned. Therefore, they can be considered somewhat unpromising and relatively incoherent. In this EMR we will focus on the average performance of several equity indices to try to define a likely outlook.
The frequent repetition of comments – in the media – suggests that economic developments should be reasonably consistent from country to country. The charts, in this EMR, raise the question: What can be inferred from the performance of Swiss and US GDP for the respective equity indices and currencies, in the current uncertain and controversial environment? What follows is what we presume to know.
Recent developments show on the financial markets that hope and fears are not and cannot be the only tools explaining their performance. Consequently, in this EMR we focus on the performance of selected equity indices. In addition, the environment continues to be characterized by absurd and unacceptable armed conflicts and other shocks that could shake the world.
Last year saw Russia’s much-publicized military misdeeds in Ukraine and the war in the Middle East, as well as international power struggles in the technology sector. In addition, a new difficulty emerged, namely the “closure” of the Suez Canal. Shipping companies have faced longer delivery times and thus increased costs for Asia-Europe trade through the Cape of Good Hope at the southern tip of Africa.
Examining the developments of the SPI (Swiss Performance Index) and the DJIA Index e.g., for the last four years, both on the end of month and on a monthly average basis, as implicitly shown in the following charts, is indeed highly revealing. What can be deduced from the following charts is here the following.
It is well known that the IMF has issued a specific warning, namely that “financing the fight against climate change, only by means of incentives, seriously risks putting states” budgets in crisis. The IMF warning makes explicit reference to competition in the context of the energy transition campaign, and in particular to the U.S. Inflation Reduction Act (IRA), of August 16, 2022, which in hindsight has much more to do with fighting against inflation than with climate change.
Assessing the main determinants of economic developments has become extremely difficult, both in terms of duration and cyclical importance. As repeatedly pointed out in previous EMRs, we would like to state once again that the available long-term data, e.g., those on U.S. GDP, really seem to support our view that the outlook is not primarily as expressed by main stream analysts.
What has the “Buridan Donkey Paradox” to do with today`s economic assessments? Well, it stands for “when choosing not to choose becomes a bad choice”. It is a figure of speech referring to someone who, when faced with two equally valuable alternatives, does not make up his mind to choose one of them.
What can be inferred from the following chart of the Dow Jones Index, based on publicly available data?
A detailed and specific assessment of the current global economic environment remains a major challenge, especially given the difficulties of reliable forecasting, which still has to rely on lagged data sets. In this context, two causes are particularly instructive. The first concerns visible anti-Americanism versus growing support for China and Russia, in particular.
