Markets and central banks confidently expect a comfortable new “Goldilocks” era for the global economy that will allow everyone to live happily ever after. But investors’ sanguine outlook rests on four cognitive biases.
LONDON – Do you believe in fairy tales? If so, you could probably earn good money nowadays as a financial trader or gain power and prestige as a central banker. While annual inflation in the United States, the eurozone, and the United Kingdom has soared to 40-year highs and will probably hit double digits after the summer, financial markets and central banks seem confident that the war against surging prices will be over by Christmas and that interest rates will start falling by next spring. If this happens, the world economy will soon return to the financially perfect conditions of the Goldilocks fairy tale that has entranced investors for the past decade: neither too hot nor too cold, and always just right for profits.
LONDON – Do you believe in fairy tales? If so, you could probably earn good money nowadays as a financial trader or gain power and prestige as a central banker. While annual inflation in the United States, the eurozone, and the United Kingdom has soared to 40-year highs and will probably hit double digits after the summer, financial markets and central banks seem confident that the war against surging prices will be over by Christmas and that interest rates will start falling by next spring. If this happens, the world economy will soon return to the financially perfect conditions of the Goldilocks fairy tale that has entranced investors for the past decade: neither too hot nor too cold, and always just right for profits.