While a constant concern since the Global Financial Crisis (GFC) has been that easy monetary policies would cause surging inflation it simply hasn’t occurred. The absence of inflationary pressures is a good thing, as it means the global “sweet spot” of okay economic growth, with low interest rates and bond yields can continue. But what if we end up with sustained deflation? A renewed plunge in bond yields over the last year to record or near record lows is warning of just that.
2014 saw good returns for diversified investors as the global economy continued to grow and monetary conditions remained easy, but a combination of uneven global growth, worries about deflation, plunging commodity prices, soft growth in Australia and geopolitical concerns meant returns were uneven across asset classes.
The past year has seen the world oil price fall by more than 50%. Late last year as the fall accelerated this started to act as a drag on share markets and this has resumed at the start of this year as the oil price has continued to slide. But what’s driving the oil price plunge and isn’t a fall in oil prices meant to be good news?
2014 has had its share of worries with a range of geopolitical threats, uneven global growth, the end of quantitative easing in the US, plunging oil and iron ore prices and a debilitating debate about budget cuts in Australia. Yet again, events have conspired to indicate deflation as opposed to inflation is more of a risk.
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- Dave’s CornerJuly 7, 2020 - 1:59 am
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