Investing in the Post-Modern Cycle

I recently sat down with Peter Oppenheimer, Chief Global Equity Strategist and Chief of Macro Research in Europe for Goldman Sachs and the author of Any Happy Returns: Structural Changes and Super Cycles in Markets.  Despite the fact that Peter has worked in finance throughout his entire adult life, he went to school for Geography, earning a BSC 1st Class from the London School of Economics. Our discussion covered everything from his work at Goldman to his analysis of the FTSE 100 and Nikkei.

Can inflation and growth coexist?

I recently noticed two very interesting headlines on the front page of the Wall Street Journal.  One referred to the weak demand for 10-year US Treasuries at auction, and the other referred to economists seeing good times ahead of us. The dichotomy of these two headlines was very interesting to me, so I had to get Peter’s take. He didn’t believe that this coexistence was unusual. After all, there were very dismal outlooks on the economy just a year or so ago, and now it does appear that the economy will continue to grow. Unfortunately, since inflation was a problem when this growth spurt began, it will continue to rear its ugly head going forward as demand continues to increase.

Living in a more uncertain world

Over the past couple of years, we’ve had some very unexpected things happen, from the COVID-19 pandemic, to the invasion of Ukraine, and, most recently, tensions rising in the Middle East. Many believe that the world is becoming more uncertain, and Peter would tend to agree with that. Not only are we living in a world where things are constantly changing, but we’re living in a world where the rules are constantly changing. This constant changing of rules heightens the normal amount of uncertainty to which we’re accustomed.

The post-modern era - The biggest risk and opportunity

In this increasingly uncertain world where things are changing rapidly, Peter believes the biggest risk is actually a structural risk in government debt. Governments are taking out more and more debt to fund aging populations, unfunded liabilities, defense spending, tariffs, and subsidies.  This ballooning amount of debt may mean that interest rates have to go up over time due to the fact that governments are overleveraging. Despite those headwinds, Peter believes that artificial intelligence and decarbonization are two of the biggest opportunities and reasons to remain optimistic. These technologies will change the world by increasing productivity, growth, and real income.  

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