Macroscope | To find the next big investment darling, just follow the science
- The global economy has been hit by many shocks and short-term uncertainties remain, but science-led structural changes will provide growth opportunities
It is increasingly evident that this is not a normal business cycle. While there are elements that are familiar – tight labour markets, inflation and monetary tightening – many of the dynamics are unique.
There are a few big themes that we need to continue to try to understand: the resetting of monetary policy, continued shock waves from the pandemic and, notably, the growing long-term dominance of science over finance.
Inflation is the symptom of imbalances resulting from years of loose monetary policy and the supply-demand disruptions that followed the pandemic and the Russia-Ukraine war. Rising inflation since last year has called for a paradigm shift in monetary policy.
But economists, financial market participants and central bankers do not appear to know when this shift will be complete and what the eventual implications will be. Central banks have become more reactionary. Any inflation data release deviating from the idyllic path of a quick return to the pre-pandemic utopia of a global 2 per cent rate means central bankers are likely to become more hawkish.
