In search of Goldilocks
Over the past 15 years, the idea of a ‘Goldilocks’ global economy – not too hot, not too cold – has been on investors’ radar screens. In this environment, there is enough economic growth to keep company earnings ticking over, but there is no overheating that results in elevated inflation, forcing central banks to hike rates. Clearly, Goldilocks has been absent of late, with the pandemic causing wild swings in economic activity, company profits, inflation and eventually, a surge in interest rates. Along the way there have been simultaneous bear markets in global bonds and equities, a rare occurrence. Could we be re-entering Goldilocks territory? Or are the bears about to return from their walk in the woods?