Contrary to widespread predictions, the US economy has defied expectations of downturns from tariffs and inflation, a resilience that challenges conventional wisdom, according to TradingBlock’s Vice President of market strategy, Michael Martin, even as he warns of the UK’s precarious fiscal position.
Martin shared his insights on the current state of the global economy in an interview with Invezz. With a wealth of experience in financial markets, Martin provided a nuanced perspective on the challenges and opportunities that lie ahead.
His analysis is particularly relevant as economies around the world grapple with shifting dynamics and uncertainties.
The resilience of the US economy
Martin addressed the complexities of the global economy, particularly in light of recent shifts in US economic performance.
“The global economy today is exceedingly complex and increasingly precarious,” he stated.
He emphasised that much of the current economic landscape hinges on US policy decisions, which can change rapidly.
Despite widespread predictions of economic downturns due to tariffs and inflation, Martin noted that the US economy has shown resilience.
“Almost everybody has been wrong,” he remarked, pointing out that the anticipated negative impacts of tariffs on US growth have not materialised as expected.
Inflation, too, has remained lower than many forecasters predicted. However, he cautioned that this resilience does not negate the reality of overvaluation among US companies.
Martin expressed skepticism about the prevailing trend of diversifying investments away from the US into Europe and China.
He added:
European equities are undervalued, but it is wishful thinking to assume they will climb simply because U.S. valuations are high.
He highlighted the long-standing challenges Europe faces, including overregulation, which continues to hinder its economic potential.
Risks and opportunities ahead
Looking forward, Martin identified key risks and opportunities that could shape the macroeconomic landscape over the next 12 to 18 months.
He pointed to tariffs as a significant risk factor, stating, “In the US, tariffs equal inflation.”
While inflation has not yet surged, he warned that this could change, leading to persistently high interest rates and slower economic growth.
Outside the US, Martin noted that Europe is grappling with regulatory burdens at a time when it can least afford them.
“The dynamic shifts,” he said, indicating that while China struggles with structural weaknesses and a real estate crisis, other regions in Asia might benefit from shifting supply chains.
He suggested that the coming months may not see broad global expansion but rather selective growth.
“A few regions may benefit while others stagnate under the pressure of policy and structural headwinds,” he predicted.
This selective growth could redefine investment strategies as markets adapt to new realities.
The UK’s fiscal tightrope
Additionally, on the recent budget announcements in the UK, Martin offered a critical evaluation of the balance between short-term growth stimulus and long-term fiscal sustainability. He remarked:
The UK budget has no slack built in. Growth must come fast, but it will not be enough on its own.
With rising borrowing costs and the burden of debt service, Martin emphasised the importance of maintaining credibility in fiscal discipline.
The government has little choice but to walk the line between short-term stimulus and long-term control with little margin for error.
As countries navigate these turbulent economic waters, Martin’s insights serve as a reminder of the intricate interplay between policy decisions and market realities.
His analysis underscores the need for careful consideration of both immediate and long-term economic strategies.
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