September has been and gone...and now the final quarter of the year awaits. Much to think about in global markets at the moment. As I wrote earlier in the week:
A careful selection of equities resting on a diversified bed of other investments should be choice of the average investor today...and for the next few years.
Many would argue it has always been this way over the longer-term. However, if we go back to the 1950s, consensus was that equities yielded more than fixed income opportunities to reflect a higher level of risk in the former. A type of equity risk premium if you like. Such a view was developed in a world of overt business cycles and speculative business opportunities. Naturally, such traits have not gone away, as the crisis just over a decade ago and the exogenous shock of COVID-19 this year both show. What has built up, first in Japan in the 1990s, and more broadly in many other developed market financial markets in the last ten or so years, is a fear that a regime shift is occurring.
The best rationale for regarding current fixed income yields as more of an opportunity than a threat is centred on the expectation of a debt-deflationary cycle of low growth, low inflation, and hence - via the Fisher Effect - low interest rates for the foreseeable future. If you are more optimistic on one of economic growth or the forward inflation profile, then of the three mainstream asset classes above, you are likely to prefer an equity-centred opportunity. Naturally, gold - as befits its omnipresent profile in the global financial system over the past couple of millennia - could fit into both.
As always you can follow my day-to-day thoughts on my twitter feed @financial_orbit
And talking about twitter, here are more top tweets of September
In third place we have one of my UK RNS postings. Check out my feed 7-7.15am on every working day for my 'flash' RNS observations.
In second place we have this comment...