Reverse ferrets, $4 trillion of M&A and tantric sex were all to the fore last Thursday when Newgate Communications launched our discussion series: “The View from the Bridge” with a timely and surprising debate on “The New Normal”.
We assembled an excellent panel featuring Deutsche Bank’s chief UK economist, George Buckley, Michael Findlay, co-head of corporate broking at Bank of America Merrill Lynch and Jonathan Guthrie, City editor of the Financial Times.
Of course when you title a debate “The New Normal, strategies for a low growth world” you leave yourself open to being swamped with optimism. And so it transpired.
Though George Buckley did say that the current economic recovery was slower than the great depression, and he was only forecasting 2% growth going forward, he then reeled off a flurry of positives. Inflation is lower, employment is back at its peak, money supply is growing, savings ratio has increased, debt levels have come down, income gearing has fallen. However, he cautioned that there was a concern about innovation – that there is a feeling that the great technological improvements of the last few decades, which have fuelled growth, may not be forthcoming in the future.
Jonathan Guthrie was even more positive. The “old normal” has not turned out to be as bad as envisaged in 2008. A number of “dogs” haven’t barked – such as the Euro collapsing or the Chinese economy hitting a hard landing. There’s been no surge in unemployment or insolvencies, workforces have been flexible, banks have been willing to hold on to damaged debt. This was despite certain negatives – such as the UK’s relationship with Europe which he likened to tantric sex, going on for ages without reaching any conclusion. Mind you, he warned, in financial markets there can always be unexpected events that can spoil everything.
The most positive of all was Michael Findlay. He’d seen increased confidence in second half of last year and markets are already up 10% in developed markets this year. Investors and companies have cash to invest and investors are now looking for performance – Bank of America Merrill Lynch is seeing a major switch from bonds to equities and investor interest has shifted from defensive stocks to cyclical companies, including banks. He felt the IPO market will be better this year though M&A remains tough – the market has remained stable at $4 trillion for four years. However most European companies have cash on balance sheets and look in good shape and CEOs will be looking to make acquisitions.
The general mood is that the “new normal” – low growth, volatile markets, uncertain returns – might not actually be the new normal, as it were. So the debate followed what Jonathan Guthrie told us was a “reverse ferret”, when a newspaper sees markets tumbling in the morning and so prepares a “financial apocalypse” story, only for the markets to recover and the piece turned into a learned discourse on volatility.
Given that reversal, we’re planning the next breakfast: “The View from The Emirates: where Arsenal’s season has gone wrong.”