by Chris Becker
The always astute Saul Eslake has come out not in support of the “soothing-sayers” but displaying some realism, explaining that the current market turmoil is not another GFC, but more like the start of a normal bear market.
More from Fairfax:
“I don’t believe the turbulence we’ve seen in the equities markets in the past couple of months – initiated by events in China – is the beginning of another significant global crisis,” said Mr Eslake, who left his role as Bank of America Merrill Lynch’s chief economist in June this year.
“I don’t think there have been the sort of signs of a more generalised flight to quality or panic associated with financial markets. If anything – and it’s not a close parallel – it’s more like the tech wreck of 2000.”
In other words, don’t conflate a not unusual period where asset markets drop in price for a “Zoh my god, the world is going to end” GFC like devastation.
Indeed, up until the Fed decided to let Lehmann Brothers implode, it could be argued the GFC’s aftermath could have been avoided, ala the 1997 bailout of LTCM.
Maybe its a case of too many market participants not experiencing bear markets and are too used to central bank helicopter wisdom to reinflated asset prices.
On that note, Saul is still expecting the US to raise rates, although not in September which is a given, according to interest rate futures. Friday nights NFP with almost no inflationary from average earnings increases and the big slack in the labour market put paid to that.
Get used to this action in the Great Volatility as central banks move between normalising rates and pumping up markets as the after-effects of the last GFC still need to be digested before brewing another one.