April: Running hot or running into recession?
Business and investment strategies to prepare for volatile supply chains and rising interest rates.
There’s money to be made and lost in volatility and uncertainty. Right now, the global economy has macro forces pulling at it from either direction. Consumers are running hot with household savings, an appetite for spending and a strong labour market that supports wage growth. On the other hand, China is locking down +50m people, triggering another supply shock, and the U.S. Fed is raising rates. Goldman Sachs are giving the U.S. economy a 35% chance of a major downturn between now and the end of next year. Businesses and investors need to get prepared.
In this months update we’ll delve into macro dynamics, business resilience, and how to manage rising rates. By the time you finish reading you should have a good understanding of the current environment and how to position your business or portfolio.
Regional Ripples and Tidal Waves
What happens in the regions impacts the world. Here’s the thing; globalisation has been a topic of discussion for decades, but the last 20–30 years have been a Goldilocks period with low inflation, comparative advantage and a continuous supply of internationally produced goods. Appliances have gotten cheaper and nations have gotten richer. As we know, COVID took a match to globalisation and burnt the supply chains to the ground. Then, just as networks were beginning to recover, Russia invaded Ukraine and China locked down millions of people in its major cities. Those global supply chains are back in flames and inflation is preparing a second big run upwards.
What often appear as isolated regional events, a lockdown in a foreign city or a conflict in another country, can easily end up as major impacts to global and local supply chains. China is a huge concern given its scale and involvement in production for the world. Locking down Shanghai not only interrupts financial markets, product markets, shipping routes and the supply of goods to Western nations. It massively…