Ex the United States, the global economy increasingly looks stuck in a low growth orbit and even the U.S. cannot continue deficit spending 8% of its annual gross domestic product without serious consequences. One may conclude the Federal Reserve’s hiking of interest rates from virtually zero to more than 5%, over an 18 month period, was serious enough although we would argue the real cost of such loose monetary policy, followed by rapid sterilisation, is still to become wholly evident.
Germany is now in recession and the EU as a whole doesn’t look much better. China’s woes, especially in the property sector, continue. Increasingly, China looks like a nation at an inflection point. Forty years of unbridled growth is coming to an end and the anomaly of communists running a wealth generating capitalist economy is probably about to get its sternest test. We remain on the lookout for businesses that possess the long-term potential we desire and can be bought at prices we can live with. Where not, we will happily retain cash until they can be.