What has the “Buridan Donkey Paradox” to do with today`s economic assessments? Well, it stands for “when choosing not to choose becomes a bad choice”. It is a figure of speech referring to someone who, when faced with two equally valuable alternatives, does not make up his mind to choose one of them.
What can be inferred from the following chart of the Dow Jones Index, based on publicly available data?
A detailed and specific assessment of the current global economic environment remains a major challenge, especially given the difficulties of reliable forecasting, which still has to rely on lagged data sets. In this context, two causes are particularly instructive. The first concerns visible anti-Americanism versus growing support for China and Russia, in particular.
Due to the recent economic turmoil and diverging developments in the equity and foreign exchange markets, the economic environment in Switzerland, as in most other democratic countries, requires special attention. According to the latest press release of SECO (State Secretariat for Economic Affairs) of 30.05.2023, the economy is not yet in a recession compared to e.g. Germany.
One of the most frequently asked questions we are getting concerns the status of the current financial turmoil, compared to previous corrections as regarding stock indices. In our opinion both the following graph and table comparisons are very telling.
On 10 March 2023, the US-based “Silicon Valley Bank” (SVP) faced significant capital withdrawals from its customers, marking the beginning of a new financial crisis. It is the beginning of the withdrawal of funds from a relatively small bank. Markets around the world panicked.
Industrial transformation, i.e., the change in the growth pattern of the last 20 to 30 years, is once again taking place at a rapid pace. Well, our search for evidence on the position of the global economy, and by extension the financial markets, led us to the Inflation Reduction Act of 2022 (IRA), passed by the U.S. Congress and signed into law by President Biden on August 16, 2022.
With its invasion of Ukraine, Putin’s Russia has challenged the balance that persisted since the end of the Cold War. Recently, the world has entered a very mixed phase of transition. We believe that this situation will persist in having a significant impact on consumption, investments, international trade, and currencies. This situation is expected to require a continuous updating of the investment policy.
At the beginning of the new year, we may ask ourselves which of the following statements may be considered correct and thus a valid indicator of the most likely future developments.
Forecasting is a demanding exercise. Depending on the data quality of the series one uses it is possible to asses a “promising” outlook. In this EMR, we focus on the development of real GDP in the U.S. – depending on the business cycle – compared to the developments of stock indices.
