Coherent Weekly Chart Pack – 20231105

The New Abnormal or the Old Normal ?

The chief economist from the UK hedge fund business Brevan Howard has been quoted as referring to the end of the Greenspan Put and the beginning of the “new abnormal” – an environment in which high & volatile inflation & interest rates and reduced equity multiples replaces the post-2008 GFC “new normal” of low interest rates, long duration assets & high multiples.

“Fiscal space is curtailed when interest rates exceed the economy’s growth rate, creating an adverse feedback loop: markets have to digest debt roll-overs at elevated rates, causing budget deficits to spiral upward” (sounds like SA).

While not disagreeing with the substance of his note, this looks distinctly like the “old normal” of the late 1980’s & early 1990’s which also had high inflation & interest rates and lower equity multiples: it looks like the old normal.