Let’s pick up the ongoing debate over what kind of market cycle this is. Readers will know I have been juggling three narratives to explain the ongoing market boom as it confronts an economic boom:
- Bad news is good news meaning the ongoing deflation (after a brief spike) will ensure asset prices outperform the economy.
- Good news is bad news meaning the stocks boom will go bust as inflation and yields rise.
- Good news is good news meaning expensive stocks can weather higher rates because the profits boom is real but there will be violent rotations under the bonnet.
Goldman is still the outstanding example of the first regime:
