A theory I have written about several times on this is that as the US economy matures (this is a very big picture long term theme I am talking about, and not in any sort of apocalyptic way) it will start to look like the older, more mature, European economy.
What I think this means is tighter correlation in economic and stock market cycles. Also, I would expect milder recessions and expansions.
A part of this equation is the globalization of the world's economy. Perhaps there will be three kinds of countries; old slow growth service economies, fast growing emerging markets, and commodity-based economies (emerging or not).
This is a fairly benign outcome for the US compared to the discussion on Friday about Mr. Soros' expectations.
As it is a theory, it could be completely right, completely wrong or right in direction but wrong in magnitude.
Apparently I'm not the only one to think along these lines ( I never thought I was). Barron's European Trader touches on the concept as Alan Wilde, director of fixed-income and currency at Baring Asset Management talked about the current state of the gilt market being a template for the US treasury market.
He feels the long end of the gilt curve ( the UK issues 50 year paper) will go lower and stay lower. He sees the US following behind in a similar manner. Right or wrong, the idea behind the idea is more synchronization between the two.
I think some measure of change is inevitable. As far as I am concerned a low return environment in the US for years to come would be a very good outcome compared to the financial Armageddon some are calling for.
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1 comments:
Sometimes, we neglect to recognize that representative government possessing a meangingful portion of values, ethics and candor with an effective military at its disposal has an all-important influence on investor will. To blissfully ignore, for intents and purposes, what is presently occuring in strategic nations not only impairs the President, but will discourage our military effectiveness, confound diplomacy and lead us down a perilous road. This cannot be good for investors -unless the situation deteriorates to the point of global war, when a wonderful bull market will likely emerge. If,of course, investors are alive to participate in it.
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