The Age of Turbulence

By Walter J Talledo

Five years later to the day, we find ourselves in an era driven by Covid and further bottlenecks including inflation run amuck and ever-increasing uncertainty about what the future holds for all of us. Collectively, we face challenges including global climate change which is au courant, since the Kyoto Protocol in 1997, and currently being addressed in Glasgow this week at COP26 by many a leading nation barring Russia and China. On top of that, a new Biden administration faces major challenges across the board within its own party, that of the left-wing democrats, international hotspots featuring Afghanistan once again in control of the Taliban twenty-years after the heinous attacks on the World Trade Centre, (scores of lives lost, and a generation robbed of its innocence when the second plane hit the building) not to mention a more than likely resounding defeat in the mid-terms next year, if we go by the underperformance recorded last night in Virginia and New Jersey, the latter a Democratic stronghold, though counterbalanced by retaining the Governorship of New Jersey for the first time since 1977. Nevertheless, the author remains steadfast and standing firm in his belief that we have much to be hopeful for.

Addressing the nation, while global market indices eagerly awaited a decision by the Federal Reserve, its 16th Chairman, Jerome Powell, adamantly defended that "we understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission." To be specific, tonight the Federal Reserve has unanimously agreed to start taper in November and continue in December at a pace of $15 bn per month with $10 bn in Treasurys and $5 bn in mortgage backed securities. In response to CNBC's Steve Liesman, Chairman Powell addressed the accommodative policy leaning towards fostering unemployment underscoring its effectiveness which puts it "in a position to address a range of plausible outcomes" in an era of economic recovery where inflation is "due to bottlenecks and is due to shortages and is due to very strong demand meeting those [factors]." Arguably, it makes sense to hold off raising interest rates for the time being primarily because the labour market has yet to show signs of a robust recovery and may weaken should Covid and its Delta variant prove to be a medium-term scenario thereby giving rise to an outcome where inflation may recede on its own.

By definition, global markets are driven by data and as such while a thorough understanding may prove to be an exercise in futility by no means should it be taken as a discouragement to at least try for, in the process, those who seek to gain insight, certainly benefit from the knowledge acquired. It should come as no surprise then that five hours before Powell made his announcement, both the Dow Jones Industrial Average, and the S&P 500 turned negative while the Nasdaq held its own -- virtually unchanged. By the end of the session, however, for a second day in a row, all four major averages (including the Russel 2000) closed at a record high signalling relief at the call of the Federal Reserve to wait before raising interest rates, should it become necessary in the foreseeable future. The reader would be well advised to take into consideration the yield curve, the difference between short-term interest rates and long-term rates, which given the growth we are seeing and inflation we are witnessing, some would argue, should be a lot steeper. One factor that may account for the curve being anything other than steep is the fact that fundamentals, known as financial data and characteristics used to determine the health of any business, are quite strong (i.e., Bed Bath & Beyond, Tesla, Microsoft, All Birds, not to mention those companies in the Energy sector being driven by short supply and high demand) which proves that this is, indeed, seasonably a very interesting time for investors to gauge market opportunities to capitalise on by the end of the year.

The evolution of the economic data and the factors that will shape its development over the next several weeks shall indeed be driven not only by fundamentals, inflation, supply issues but also by the narrative and those "contagious popular stories that spread through word of mouth, the news media, and social media." In his "Narrative Economics," the Nobel Memorial Prize in Economic Sciences, Professor Robert J. Shiller argued that the "study of the viral spread of popular narratives that affect economic behaviour can improve our ability to anticipate and prepare for economic events." To be clear, the narrative being taken to the airwaves, and online newspapers finds its way into the kitchen tables and living rooms across the world and may, indeed, help individuals make decisions when it comes to discretionary spending that will affect the overall shape of the economic in the short-run. However, the reader would argue that there is another theory at play, namely, the one devised by the zoologist and atheist Richard Dawkins, known as the "Meme theory." Simply put, an idea, a song, a food recipe or a political ideology - so long as it gets repeated over and over again - tends to become ingrained in our minds and, hence, become accessible to the minds of others who become both the recipient and transferor of that "meme." Case in point, when asked last night why the President of the United States had mentioned the name "Donald Trump" over twenty times in his speech, Joe Biden, confessed that he "hadn't kept track of the number of times." According to Dawkins, our relationship to memes is "parasitic because they use us" profiting from our ability to engage in meaningful conversation with our peers. Yet, the question remains, why, has "The Donald" not gone away since his defeat at the polls in 2020?

To be clear, the reader wishes to acknowledge the upbeat economic track-record of the 45th President of the United States which pales by comparison to that of his predecessors when taken into consideration the single term that he served. To be specific, in the first quarter of the year 1950, economic output increased by a peak of 16.7%. That figure was shattered in the third-quarter of 2020 by a mind-boggling 33%. The first three years of the Trump administration experienced average economic growth that surpassed that of the last three years of President Barack Hussein Obama. Nevertheless, focusing only on financial data may prove to be shortsighted and would do the reader and potential American voter no favors when it comes to making a decision as to who is the right candidate to lead the greatest nation on earth through these "turbulent times." Duke Professor, James D. Barber, won national acclaim for having accurately forecasted a gloomy denoument for Richard Milhous Nixon, the first President of the United States to ever resign, through his Presidential Character theory which psychologically deep-dived into a person's world view and personality type. One need not go further than a 2016 tweet by the former President where he both allegedly mocked and threatened the wife of Presidential candidate Ted Cruz. More recently, 45, faces a December 23rd deadline to be deposed in an alleged sexual assault lawsuit filed by a former Celebrity Apprentice contestant known as Summer Zervos - Donald J Trump was at the forefront of the successful reality television series "The Apprentice" for more than fifteen years thanks to Survivor Executive Producer, Mark Burnett. It goes without saying that Professor Barber would have had a field day when trying to predict what a second Trump administration would look like yet, once again, our analysis may be short-sighted if we fail to consider the economic factors involved.

To be fair, the resilience we are witnessing in the markets, indeed, stemming from February 2010, the end of the longest economic expansion in American history, may be to some extent be attributed to the "turbulent age" of the Trump Administration. During his first term, the nation, the economy and the world was put through a flurry of activity driven by a man whose energy seemed to have no apparent limits. One may remember the time he welcomed the freed hostages from North Korea at the airport after having been active for most of the previous twenty-four hour period. Indeed, the meeting of both the dictator of North Korea and the President of the United States at the Korean Demilitarised Zone is now subject for historians to review and record. Moreover, his "America First" slogan part of his "Make America Great" (MAGA), "a meme" as defined by Richard Dawkins, drove the world into an age of competing tariffs that shifted multilateral agreements to bilateral negotiations - Trump had, indeed, changed the pattern and shifted the paradigm. In the process, arguably, he trained and prepared the markets for just about any possible scenario it could face. His four years in office were a tried and tested testament to what a turbulent mind, as no doubt would Professor James D. Barber argue, is likely to bring about should it come to power. Why, then, should the world be wary of a second Trump term? In the author's humble opinion, should we narrow our expectations to only economic performance we run the risk of dismissing the warnings from the personality type of the 45th President of the United States who is capable of allegedgly bringing both the best and worst in people. Case in point, the political rise of my fellow Connecticut native Hope Hicks who became White House Communications Director at the age of 29 only to find herself, less than two years later, subject of a 9 hour closed-door testimony before the?House Intelligence Committee for her role as communications director, confessing that at times she had told "white lies."

In the final analysis, America, the leader of the free world, deserves a leader that can carry us through these turbulent times, not only by the promise of economic opportunity but also by the example in her or his conduct essentially because the future generations of the planet we live in are both listening and watching us and will inevitably imprint on that which we leave behind as examples to follow. In the words of BlackRock CEO Larry Fink, when addressing such challenges as Global Climate change we so desperately need a leader that will not only be "brutally honest but go beyond [the narrative] and window dressing." The time for showmanship, reality shows, and, indeed, "The Age of Turbulence," may not necessarily be over but we all know that we deserve peace of mind and quieter times and, as such, eagerly await the arrival of one such leader that shall woo us and inspire us to believe again and help us restore tranquility.

Personal Note: The author wishes to dedicate this latest piece to his sister Magaly for shaping his own worldview and understanding of what it means to be human all too human.