There remains much uncertainty in the markets as investors face difficult geopolitical and economic times – and as the world continues to try to unravel the aftermath of pandemic spending and inflation.
Yet despite clearly unprecedented times, investors and experts seem determined to push ahead with old beliefs, bent on ignoring the evidence before them.
“Economic and political risk is clearly growing but the ebullience of investors has valuations at very expensive levels. Things are literally priced for perfection, despite still being at the highest interest rates in many years. Markets seem not just confused but in denial that anything could go wrong,” the experts at Canso Investment Counsel Ltd. write in the July 2024 Canso Market Observer.
Despite repeated evidence that central banks haven’t been able to fully tame inflation, and that the amount of money thrust into the system during the pandemic would make it difficult to get things back under control, many experts and investors seem unwilling to concede that we may still be far from the solid economic footing they’re hoping to see.
“Now that the market consensus is united in its belief that we have arrived at the nirvana of an economic soft landing, we’re starting to get worried that economic weakness and even recession might be a distinct possibility,” Canso writes.
“We are increasingly worried about the effect of rising interest rates on levered issuers, particularly those companies loaded up with debt by their Private Equity (PE) sponsors.”
To learn more about Canso’s views about how investor (and central bank) behaviour, yield curve (mis)readings, and debt levels may be impacting the markets, check out the July 2024 Canso Market Observer.
DISCLAIMER: The views and information expressed in this publication are for informational purposes only. Information in this publication is not intended to constitute legal, tax, securities or investment advice and is made available on an “as is” basis. Information in this presentation is subject to change without notice and Canso Investment Counsel Ltd. does not assume any duty to update any information herein. Certain information in this publication has been derived or obtained from sources believed to be trustworthy and/or reliable. Canso Investment Counsel Ltd. does not assume responsibility for the accuracy, currency, reliability or correctness of any such information.
