The great policy scramble

Europe is sliding back into recession, China has pushed back its 2025 plan by a decade and US market tremors have forced the Federal Reserve to make an embarrassing about-face in its first 2019 outing. Welcome to the Grand Finale of what Saxo’s chief economist Steen Jakobsen terms “the worst monetary experiment in history”.

It is both difficult and dispiriting to tally the costs of the extend-and-pretend regime. The replacement of the business cycle by a mere credit cycle, the inflation of asset prices and the creation of the worst inequality seen in generations have already wrought foreboding economic and political changes. These are the ingredients of the coming panic, which will likely see policymakers scramble wildly to recover some semblance of post-crisis normalcy.

These problems, as well as the problems created by trying to solve them, will bring volatility, turmoil, and wild swings of sentiment to markets this coming year. Whether 2019 marks the start of a new cycle or merely the prelude to an introduction, clear-eyed investors will need to be more active and dynamic than ever before.

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