OUR COLLEAGUES AT CROSSBORDER CAPITAL EXPLAIN WHY THEY BELIEVE THIS CYCLE MAY BE EXTENDED

Investors are more than ever puzzled by the messages coming from economic data: reflation, inflation, disinflation and maybe even deflation? We believe this is because the World economy is out-of-step and so there are different messages coming from different parts of the globe. Latest capital flow and money creation data from our friends at CrossBorder show a de-synchronised picture, where Asia (and China) are early in the cycle's upswing; the Eurozone is mid cycle and the US is late cycle. We are particularly taken by the sharp upward rebound in capital flows and trade data from developed Asian countries such as Singapore, Hong Kong, Korea and Taiwan. These are another indication that Chinese reflation is at the heart of these developments.

 

Taken together, these global liquidity cycles are the most divergent CrossBorder have seen for quite some time, which may tell us that globally this expansion can last longer than many believe. However, selecting the correct markets is key and we favour Asia and Europe, while the US economy, as we have warned in the past, is at danger of going ex-growth.

 

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