2008_06_30 — “High and rising energy costs are compounding a deceleration”

High and rising energy costs are compounding a deceleration

High and rising energy costs are compounding a deceleration in the global industrialized economy which has already been weakened by the subprime mortgage fallout. The energy crunch has further stoked inflation concerns, which have added to selling pressure in the global bond market (since inflation erodes the value of bonds). The U.S. economy is in a morass, dragged down by a housing bust and subsequent credit crisis. Although not abysmal, employment is weak and consumers are retrenching; home, auto, boat and consumer sales have been crushed. Retail stores are closing and shopping centers are losing their tenants. The Federal tax credit boost caused a short-lived positive aberration but won’t turn the tide. The sole positive note is that the weak dollar has helped domestic exporters, thus the overall manufacturing sector is only in a mild slowdown phase. None-the-less, risks remain on the downside until the consumer retrenchment is further advanced and/or some relief from soaring commodity prices arrives.

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Michael Ashley Schulman

Michael Ashley Schulman

Avid traveler and art fan, also Partner & Chief Investment Officer @Running Point Capital, a multifamily office and ultra high-net-worth money-management firm