The Rise of a New Economic Super Cycle: What to Expect in Global Markets
On December 13, 2023, the Dow Jones Industrial Average closed on the floor of the New York Stock Exchange displaying a period of economic expansion, signaling the potential start of a new super cycle. According to renowned economist Oppenheimer, super cycles are characterized by lengthy periods of economic growth, increased GDP, high demand for goods leading to higher prices, and high levels of employment.
Oppenheimer, discussing content from his newly launched book “Any Happy Returns,” highlighted the most recent significant super cycle that began in the early 1980s. This period was marked by peaking interest rates and inflation, followed by a decades-long period of falling capital costs, inflation, and rates, as well as economic policies such as deregulation and privatization. Meanwhile, geopolitical risks eased and globalization grew stronger.
However, Oppenheimer noted that not all of these factors are set to continue as they were. He expressed concerns about rising interest rates, pushback to globalization, and increased geopolitical tensions, citing events such as the Russia-Ukraine war, U.S.-China trade tensions, and the Israel-Hamas conflict as causes for market concern.
Despite these challenges, Oppenheimer also highlighted potential positive forces that could impact the economy, such as artificial intelligence and decarbonization. He emphasized the potential positive effect of AI on stocks and its impact on productivity.
Drawing historical parallels, Oppenheimer compared the current economic developments to periods in the early 1970s, 1980s, and even the late 19th century, pointing out that cycles and structural breaks do repeat themselves but never in exactly the same way. He stressed the importance of learning from history to best position for the future environment.
As global markets navigate these potential super cycle dynamics, investors and policymakers will be closely monitoring the economic landscape to understand how these shifts will impact financial returns and guide their decision-making.