“One in five Americans invests in the stock market,” the author said.
Five major trends affect global business: a profound technological revolution; the increasing demand for high qualitative standards; growing influence of geopolitics on the economy; the disruptive leadership of innovative companies; and as a result of systematic volatility and instability.
This in turn constitutes, three major changes: the most dynamic actor of the new economy prevailed over the status quo of traditional national states; dynamic “ecosystem” of cross-border alliances between companies, inventors, financiers, investors, qualified service providers and creators of applied knowledge; and growing scope of intellectual capital, which is the most important engine of the world economy.
A consequent quality of time is the systematic of all. Volatility is included. Structural and interconnected causes and effects converge to create complex realities (the dictionary says that something complex is made up of different elements) and is also unstable. The adjustment observed in stock prices in the United States (and in other markets) has background factors that accelerate other more circumstantial.
Among the latter is the current impact of recent monetary and fiscal expansion, that is it is an extraordinary remedy to which we must return and where a price must be paid: the Federal Reserve decided in May the largest interest rate increase in 22 years and expects the trend to continue to return from the previous prodigal.
Therefore, while the pendulums of the situation are always returning, we are witnessing the technical changes typical of globalization of all, which are changing the results in many businesses. Thus, monetary adjustments are mixed with production and logistics bottlenecks (the operational effects of the rebound after the confinement in the West, and the current lockouts in China are a manifestation of this), amid rising commodity prices fueled by the war in Ukraine (which, according to Thomas Friedman, was the first “global” war because it generated social and economic consequences on all continents).
Meanwhile, other less “macro” movements influences the results of companies. The provision of microchips This is not only over-demand due to the productive rebound, but also due to an emerging technology of sectors that until recently used fewer electronic inputs.
The supply of shipping transportation is affected by excessive demand, but also a replacement to some ships. And many consumer spending in the U.S. has shifted 30 months on Covid-19 and has affected the relevance of several industries.
At the same time, the strengthening of Treasury bonds as a haven against turmoil is changing several investor preferences: in the United States, 1 in 5 people save on stocks and the effect of wealth (or vice versa) functions as procyclical.
They mix like this various causes of volatility: circumstantial due to an unavoidable configuration, contextually due to weaknesses in the frames of reference. José María Peiró in Organizational Psychology says that there are 4 critical elements to evaluate a market: its stability, its complexity, its randomness and its access to resources. Now all four factors appear to be under pressure.
Source: Clarin
