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This week I attended – for all my sins - an economic conference. Enough to put many asleep, but I managed to stay awake for the bleak warnings handed out.
Yes slowing GPD; rising inflation driven by shortage of labour; rising interest rates with a minimum rise in the coming year of .5% and possibly as high as a 1% or more.
The ‘R’ word – recession – was avoided, but other words were uttered which meant the same.
So what can we glean from all this?
The message is one of caution, but for those of you who follow the financial markets – the majority of our readers - it does not mean you throw your hands in the air and walk away from the markets. It means reassessing where you place your funds.
Economists are generalists by definition and like research house analysts they cannot have full knowledge of the whole spectrum of their subject. They have a role. However, just as an accountant may have a role in business finance, this does not make them specialists in personal financial advising.
There is a place for fundamental analysis as the fundamentals of the economy and in turn companies, have to support what we may be seeing in market action. The two combined are a powerful armoury, but only when both are used correctly.
I am sure most of our readers would agree that it is all about timing. You can be right on price projection, but if you get timing wrong you can get wiped out.
Economists – as well as media commentators, are in my view natural bears and are often better at picking recessions than booms. You may have heard the back-handed accolade economists are given; "they have been successful in picking seven of the last two recessions we have had".
Without doubt this is a time for caution and reweighing your portfolio. Next week we will look at what sectors are ‘hot and those that are not’.
Enjoy the ride
Tom Scollon
Chief Analyst
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