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The View From The Kremlin; Anybody Going To Lubyanka?

By Art van Bodegraven | 02/04/2018 | 9:22 AM

Please enjoy the thoughts and musings of our friend, supporter, and long-time contributor Art van Bodegraven Jr., who passed away on June 18, 2017. Art was a prolific writer and had amassed a collection of unpublished blog posts he had planned to run well into the future. To honor his memory, we will continue to post these remaining blogs as he had intended. If you’ve been a fan of The Art of Art blog, check out our tribute.

 

We face economic uncertainty, and have stretched our suspicions that the Moscow Mules continue to mess around with internal US affairs. Our fears have been amplified, as we consider the unlikihood of the financial bravado currently being trumpeted throughout the land.

A fabulously successful regional bank (Huntington), fronted by a spokesperson who parachutes into Bloomberg and CNBC from time to time, has taken a number of relevant positions as they look into their crystal balls for the next year or so.

To focus on a popular number, last year's GDP was 1.6%; this year's consensus is for very slow growth, 2.2%.  The new Administration has pooh-poohed an anemic rate of 2.3% for 2018, with unspecific promises for really strong growth coming up.

The S&P 500 appears to be poised to grow in 2018, taking profits up with it.

That said, the expert view is that trhe global and US economies seems to have greater strength than weakness embedded in them. But volatility also seems likely. The Administration will likely pivot from trade, health care, and immigration to tax, fiscal, and regulatory policies. Markets—and the Fed—will react. Inflation is likely to accompany whatever economic growth levels turn out to be.  

Global events could play major roles in domestic affairs, and domestic developments could be sea changes in and of themselves. Populism will likely permeate global elecions, perhaps governments. Politics aside, will the generational shifts of Baby Boomers and Millennials have parallel consequences with those of the Reagan and Trump elections?  

But, storm clouds might be gathering. Global populism (Brexit, France, others) might affect economic growth. Profit growth (or its lack) might dampen enthusiasm throughout the economy. Global trade wars could be an unintended consequence of "America First." Asian economies and Asian investment in the U.S. economy could suffer from domestic uncertainties, not to mention endemic slippage based on populism and/or internal conditions.

We in the SCM universe need to know these things. They affect us and our work—and we need to be aware of what goes on in the world, as well as the factors that impact our customers.

Meanwhile, will all this upset and risk, we need to recognize that global governments and central banks will continue to be the source of market volatility around the planet.

Gird your loins, and prepare for battles against unknown forces. The worst is yet to come. And the Russkis might be playing a role in it.

 

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