Investors are bearish.
Steve Englander, head of G10 FX strategy at Citi, met with clients in Asia last week and found that almost everyone was down on the global economy.
Here’s Englander (emphasis ours):
“The prevailing view is that the global economy is like a shopping mall on the rocks. One anchor store gave unlimited credit to suppliers who overproduced on a massive scale. The second anchor gave free credit to customers who don’t want to buy anymore. The interior tenants are stressed by ineffective management, a product mix that no longer appeals, pilfering and dismay that the consultants they hired introduced failed strategies.
“I don’t agree with this view, at least with respect to the US and the divergence trade, but I was clearly in a small minority in not seeing the global economy as a black hole.”
So in the view of Citi’s clients, China is in debt up to its eyeballs from propping up manufacturers, the US is in debt to consumers who aren’t spending enough, and everywhere in between is a mess.
The biggest hope for his clients, said Englander, was more fiscal stimulus to buoy global demand.
“As a byproduct of the above, most clients saw a strong economic case for fiscal policy (funded by central banks) but few saw it as a short term possibility,” said Englander. “The political mindset was not yet ready. Some were unsure whether it would ever be ready, but the probability increased if there was a real downturn.”
Overall, not a lot of good news.
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