A thought-provoking, and ultimately bullish presentation from Chris Watling of Longview Economics at the IRF investor lunch held at Browns Hotel entitled ‘The Madness of Monetary Policy’. Chris contends that the Western economic model is broken, having been built on a fall in the savings ratio to fuel consumption. The effect of a money creation glut can be seen from the negative rates all along the Swiss yield curve to the “everything bubble” where a multitude of diverse assets have outperformed nominal global GDP growth. The global financial system is slowly being absorbed onto central bank balance sheets reducing the asset pool and in combination with easy money pushing up asset prices.
Despite these issues Chris is bullish on equity markets going in to 2020 as he expects a mini re-acceleration in major Western economies. Money is not too tight/central banks are easing. The ECB is easing at a time when Eurozone wage inflation is high. The consumer is structurally robust and housing indicators are bottoming/improving. He is very bullish on the UK equity market which has not been this cheap since the Battle of Britain and advocates selling any rally in bonds over the next 30 years.