Being stubborn on a matter of principle can be costly for politicians and policymakers. They need to remember the wisdom of crowds rather than ignoring the markets, as Liz Truss and the Bank of Japan have.
US policymakers, who were wrong about inflation last year, are now telling the world to expect ‘some pain’. With serious recession around the corner globally, all asset prices will fall, but investors must be patient and hold the course, with ‘preservation of capital’ as the maxim.
Hong Kong is inevitably taking on mainland characteristics as a sovereign part of China, but we have an unique skill set that will serve us well. The city might be diminished as a global financial hub, but that does not threaten its future as a hub of finance and investment.
The 2009 financial crisis, dramatically named the Great Recession, was followed by a swift recovery; so too were the pandemic-induced recessions. This time it’s different, thanks to a long-term and uncertain shift in global geopolitics. Investors will need patience and the ability to play the long game.
An East-West split of the banking giant risks leaving it hollowed out, but more worrying is what such a move could mean for globalisation. It is the latest sign of growing restrictions on the freedom of movement of capital and people that has defined the global economy for 30 years.
Even as the Covid-19 pandemic and the war in Ukraine continue, expect the global transition to high inflation and rising interest rates to shape the market narrative. The threat of stagflation and recession loom on the horizon, but there is still time to fix things.
Emotion appears to have overtaken Putin’s reasoning, opening his country to unforeseen destructive effects, while Hong Kong struggles to deal with the consequences of its pandemic policies. For investors, the key defensive mechanism is diversification and unemotional risk assessment.
Geopolitical tensions are not always bad for stock markets, which have a history of going up in times of conflict. Inflation, higher interest rates and reductions in central bank liquidity will do more damage to economies than a territorial war in Ukraine.
The stock market will fall once the Fed finally raises interest rates, but it is not yet time for the next big monetary collapse. While there are many reasons to be cheerful, events are still building to a crescendo of worsening conditions in 2023.
As pandemic-inspired price rises ripple through economies worldwide, the focus is shifting to supply chains, money supply and slowing growth. With classical finance all but useless, the need to identify stories in modern finance has never been so important.
This year saw markets recovering from the shock of Covid-19 fuelled by low interest rates and massive monetary stimulus. The virtuous circle will turn vicious – eventually.
While medical experts say they don’t know enough yet about the new variant of concern, politicians, vaccine company bosses and economists haven’t shied away from airing their views. Markets and news stories tend to overreact to shock news, but investors should look carefully at the evidence.
No matter how bad the geopolitical issues seem between China and the US, business and trading relations are likely to remain active and cordial.
Investment in cleaning the effluent from burning fuel, reusing waste heat and regulating domestic waste disposal will lead to sustainable environmental advances.
Stung by the Afghan war, the US will turn isolationist after a century of globalisation. This will cost the world its economic growth and, more importantly, put peace at risk.
The recent hit on Hong Kong stocks from Beijing’s wide-ranging regulatory crackdown is a reminder of how closely tied the city’s benchmark index is to the fate of heavyweight mainland stocks.
Age is the last bastion of workplace discrimination, and it is not just the government’s job to put it right but that of all employers. We owe it to the economy to entice older talent back to the workplace, given Hong Kong’s low birth rate and ageing population.
Akin to travelling by plane mid-century, investors today experience long periods of intense boredom separated by short periods of sheer terror. And the ride is likely to persist.
The increased scrutiny of Didi Chuxing is just the latest tale in a global movement against monopolies. Monopolies being broken up are not always bad news for investors, but the actions taken by governments suggest scant regard for the rights of shareholders.
Investors remain assured that central banks will issue more debt if things turn sticky, but they will take flight the moment they sense the Fed has lost control of inflation and will have to raise interest rates.
The work of Nobel Prize winner Daniel Kahneman has drawn attention to how various, sometimes irrelevant, factors and information influence decision-making. Hong Kong’s 21-day quarantine might be the result of such ‘noise’.
NFTs, through their ability to securitise an underlying asset, offering a form of share ownership, could provide a way to turn creative potential into the cash needed for artists to get a leg up. However, it’s still early days.
Inflation expectations are inherently sticky. The general population may not fear rising prices for a long time – but when they do, they don’t forget. If they expect prices to rise, they demand more, buy products now, and become assertive about wages.
The Fed’s persistent claims that inflation is too low to increase interest rates have lulled markets into believing the easy money will last. But beware: when the Fed is forced to increase rates to curb inflation, markets will tumble on fear of bankruptcies.
A compact city like Hong Kong is an ideal test lab for the development of 22nd-century technologies. Yet, as we choke on the fumes permitted by our outdated regulations, why are the current innovations in clean energy not being rolled out in Hong Kong?
Many central banks, led by the People’s Bank of China, are looking at digitising their currencies. As banknotes and coins go obsolete, we could be left with several virtual bank accounts and a few virtual currencies, all run by one smartphone.
Will central bankers take away the punchbowl of liquidity that is decoupling asset prices from economic reality? It seems unlikely when they insist there is no sign of burgeoning inflation. But most workers would tell a different story, of rising shopping costs and stagnant salaries.
Hong Kong needs a voice in a China that is becoming more economically integrated, and that cannot be provided by a local chief executive. Such leadership would integrate Hong Kong’s rather separate economy more closely into China, supporting local people as they build careers on the mainland.
Moving senior management to Hong Kong shows that HSBC has finally made the rather obvious choice to focus on its home strengths, rather than seeking o be all things to all customers all around the world. The bank’s future is as a Chinese company.
Bitcoin is too volatile and unsupported to be a unit of account. It can be defined as a financial asset only if you are confident that someone will buy it from you at a higher price.