Despite a plethora of risks, the first quarter of 2024 has turned out to be better than expected across markets, economics and geopolitics. But don’t get comfortable.
Already a subscriber?Geopolitical risk expert Hagai M. Segal likes to quote a line attributed to American satirist James Branch Cabell when he describes the state of the world: “The optimist believes we live in the best of all possible worlds – and the pessimist fears he might be right.
Credit markets are enjoying unexpectedly strong demand from lenders, who are feasting on the best fixed interest returns in years; on Tuesday alone, three corporate and government bond deals in Australia were flooded with $10 billion of demand, according to Barrenjoey’s co-head of debt capital markets, Barry Sharkey.
The artificial intelligence revolution continues at pace, with Nvidia capping an extraordinary quarter with the. The pace of development in this area is both exciting and terrifying, but the potential for AI to transform economies is real. The biggest is clearly sticky inflation and the potential that the rate cuts that have been priced into markets for the second half of the year do not materialise. While corporate earnings have held up better than expected, the powerful equity market rally we’ve seen since last November has been almost entirely driven by the prospect of looser monetary policy; if central banks need to delay cuts then markets may need to pivot again, risking a correction.