The markets have been extremely volatile. In this webinar with The Finance Ghost and Andre Cilliers, Currency Strategist at TreasuryONE, they unpack some of the recent market movers responsible for the volatility in the market.
Key discussion points include:
- From one crisis to the next: First the Covid pandemic, then the Russia/Ukraine war.
- Inflation has been on the rise across the world: Although a major cause is QE, Middle Income countries have seen inflation rise more.
- Oil has done the bulk of the damage: Fuel prices have risen more than 3 fold since the start of 2020, and has behaved like an additional tax and constrained business and household spending.
- Oil price shocks form part of the inflation picture: Social discontent is not only a function of less disposable income. It is also an important factor of production and key. Spikes tend to lead recessions.
- Money supply growth now reversing, and so too will inflation: The strong impetus behind the surge in inflation is now dissipating quickly. Central banks will push even harder to ensure inflation reverses. If there is a danger, it is that central banks become over-zealous.
- US economic expectations deteriorate due to rate hikes: Businesses and households have no choice but to turn. Rate hikes, weaker disposable income and inflation are key drivers.
- Credit impulse responding to inflation and rate hikes: Businesses and households have no choice but to turn more conservative in a weaker growth environment.
- The best of the recovery is behind us, momentum is waning: Optimism of emerging from the pandemic has given way to pessimism around the business cycle. Economies are all experiencing deteriorating demand conditions, and central banks have further to tighten to fight inflation.
- ZAR still undervalued: Still room for the ZAR to appreciate and questions should be asked about argument in favour of ZAR weakness from current levels. Sets in motion an economic response that sows the seeds for a reversal.
Watch the webinar below: