By the time we see daffodils in full bloom, it is possible that the global inflation crisis will be over. If this comes to transpire, central bankers will be declaring victory. This is a very big deal!
In 2022, the 40-year highs in inflation caused interest rates to surge and a hole was torn in bond and equity prices. It is instructive to note, during this period, that underlying bonds continued to pay interest and underlying companies continued to prosper. But heightened returns on cash made bonds and shares relatively less attractive.
These forces are likely to be reversed as we go through 2024. As global interest rates decline, the recovery in bonds and shares – already under way – is likely to continue. Trillions of dollars parked in cash will be looking for a better home.
We could also see mortgage rates fall, real incomes rise and politically, this improved prosperity will potentially give Biden a fighting chance of retaining the White House but Sunak may still need a miracle to stay in No. 10!
Much can happen to derail this rosy scenario. With the benefit of hindsight, it was inflation that took volatility and losses to such extremes in 2022.
I think it worth emphasising that the 24-hour ‘breaking news’ torrent of awful events is with us always. 40 years ago it was just the BBC that caught our attention once or twice a day. Now there is a plethora of media competing for our attention and this heavily skews the impression of impending doom!
Some lighter and brighter observations:
A subsidiary of Alphabet is using artificial intelligence (AI) to dramatically reduce the time it takes to find new medicines. The platform predicts biochemical structures, which aids the creation of new drugs by recommending which potential compounds will have the desired impact in the body.
A different Alphabet subsidiary has used AI to predict the structures of 200 million proteins. Previously a PHD student would need 5 years to predict 1 structure.
Guangdong in Southern China will shortly see the world’s first pilotless flying taxi. This 2- seater resembles a drone with 16 rotors. At the Paris Olympics we might see piloted flying taxis in use.
An emerging scientific field is bioacoustics. This is the endeavour to one day understand and communicate with other species such as whales, elephants and bats (it will be a while before we’re discussing the finer points of Chekhov with Fido).
I want to end this section on a serious and positive note. I spend much of my days researching ideas and speaking with experts across a diverse field. In 38 years I have never seen such an acceleration in early stage breakthroughs, powered by AI, which will transform healthcare, logistics and much, much more.
Please note that the value of securities may go down as well as up and you may not receive back all the money you invest. Past performance is not a reliable indicator of future results. The views expressed are those of the authors and should not be considered a recommendation or solicitation to buy or sell any securities.