‘Risk On’ For Now

Ignore The Business Cycle, Look At The Funding Cycle

The upswing in the investment cycle may be 34 months old, but the climate is still ‘Risk On’. For guidance investors need to forget the fast evaporating business cycle. Asset allocation is now primarily driven by Global Liquidity. This, in turn, is increasingly the result of government fiat, or what is dubbed fiscal dominance.

Currently, economic activity is at a low ebb everywhere. Consider the plot of regional business surveys in the following chart, calculated by averaging the published national data. Asia has barely seen any business cycle since 2015, while business confidence in both Europe and the Americas has flat-lined since the COVID emergency spike.