E D'S RANT April 2018
I NVESTI NG FOR I NCOM E
For Better, For Worse Where’s 2018 heading? Michael Wilson takes the elephant in the room for a random walk, taking good care not to step on the cracks
So what are we to make of 2018, then? We’re pretty much a quarter of the way through it now but, to answer the question, it rather depends on who you ask.
It’s the looming trade apocalypse that will put an end to a ten year bull run in equities, say some alarmists. It’s the inflationary jolt that spells the end of the low bank rate era, say others – an event which threatens to pitch the entire over-leveraged world into a wave of credit defaults. It’s the tipping point for fixed interest, which is about to suffer the twin humiliations of rising inflation and a fatally undermined high yield corporate sector. And blah blah blah. Honestly, it must be true, that’s what it says in the financial press, dammit. Warren Buffett says he’s running out of ideas because he can’t find any value
anywhere. Neil Woodford, who has his back foot neatly wedged in the exit door at the moment, is sounding more like Private Frazer from Dad’s Army every week. (“We’re doomed, Captain Mainwaring, doomed.”) And those cyclically adjusted valuations on the S&P 500 are still running at twice their historical averages. The Wall of Worry is there all right, and we’re halfway up it, and the first one to back down loses his performance bonus. And yet… Inconveniently, though, this just happens to be the healthiest spell of growth that the world has seen in maybe thirty years. The International Monetary Fund says that global output rose by 3.7% in 2017, and its projections for both this year and next year have just been upgraded to 3.9% - with 6.5% growth expected for developing Asia. Worldwide commodity markets are stable, and the worldwide cyclical upswing is set to
16
I FAmagazine.com
