Shooting Down The Wrong Balloons

Being Freezbrury season perhaps the hot air antennae in Gravitas Towers are tuned a little too sensitively. But, seriously, Liz Truss and Chinese weather balloons hitting the front pages on the same weekend? What fresh hell have our prayers to St Bridget failed to forestall. Lizteria is busy telling the Torygraph echo chamber that she was brought down by the ‘left wing economic establishment’. Yep, that would be the City grandees, the Treasury, hedge funds, the IMF and that notoriously ‘woke’ bunch from the global bond market ALL agreeing KamiKwasi economics was batsh*t crazy. Not to be outdone on the crazy front, MAGA’s Marjorie Traitor Greene was equally busy, whipping up the cult by suggesting they grab their guns and shoot down a Chinese weather balloon from 12 miles below. The Biden administration finished the job with a USAF F-22 fighter jet but that didn’t prevent the usual Republican border-guard bloviating until…… the US Department of Defense let slip that just the three Chinese balloons had traversed the nation’s skies during the Trump Presidency. Cue, GOP crickets. Moving on from the ridiculous, readers should note there are a few other “balloons” out there which need debunking swiftly.

We have been bombarded with the commentariat’s gloomy certainty of recession for months but not on these pages. One of the key ‘balloons’ in the recessionary roaring has been the dramatic number of job loss announcements in the technology sector globally. Indeed, Dell have kicked off this week with an announcement of 6,500 redundancies. However, technology is only a part of the global economy and perspective is needed. For illustration, Crunchbase data reveals 2022 tech job losses of 107,000 in addition to a 2023 total moving past 50,000 year to date. So, let’s say the last 13 months have seen more than 150,000 US technology roles lost but….. the latest Non-Farm Payrolls(NFP) figures for US job creation in just the last month(January) showed a whopping 517,000 new jobs added to the economy. Oh, and the US unemployment rate of 3.4% is the tightest job market seen since the lunar landing of 1969. The tech balloon might be bursting somewhat but we’d advise a wider planetary perspective.

The IMF has already upgraded GDP activity forecasts for 2023 but the more intriguing forecast leadership is coming from money itself, specifically financial markets. And no, none of i) German stock markets just 4% away from record highs despite an energy crisis or ii) the FTSE at 4 year highs despite a self-sanctioning Brexit regime of greater severity than that imposed on Russia or iii) the tech-heavy Nasdaq rocketing by 10% this year already are the capital shifts which provide the most powerful signal. That signal is coming from the most recession-sensitive sector on the planet; the banks. While the gloomsters pound the press with tech terror the bank sector is making significant moves. And not just, in share prices. Yes, the European bank sector (Stoxx 600) is up a whopping 14% this year already but check out the Rothschild family who are forking out $4 billion to buy their bank back from public market investors. That doesn’t feel like recession-like risk aversion and it is interesting to note US markets are being led this year by recession-sensitive consumer cyclical stocks. The global luxury sector is often linked to the bank sector (and its bonuses) so check out the 18% gain for LVMH, Hermes, Moncler etc in January. So, it’s not just hot air. There is real money becoming more optimistic.

Of course, the greatest risk to wealth is certainty. There is no such thing as certainty and the tragic earthquakes in Turkey and Syria today show how dramatically unexpected events can impact future expectations. However, a focus on where real money is travelling rather than chasing media headline ‘balloons’ will probably generate better returns than hot air and speculation.

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