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US economy steps in into new ‘supercycle’
(MENAFN) The United States economy is on the brink of a significant transformation, transitioning into a new phase characterized by higher growth rates, persistent inflation, and geopolitical uncertainties. This shift, referred to as a “supercycle,” is expected to alter global cash flow dynamics, as highlighted by recent insights from economists featured in Business Insider (BI).
This emerging supercycle is anticipated to be defined by elevated interest rates and increased volatility in both geopolitical and economic landscapes. Such conditions are likely to produce inflationary pressures that will reverberate across various sectors. Notably, national security concerns are expected to play a critical role in shaping industrial planning and supply chains, indicating a strategic shift in how businesses operate.
Silas Myers, CEO of Mar Vista Investments, emphasized to BI the transformative nature of this new supercycle, warning that many investors, lenders, and entrepreneurs may not fully grasp the significant changes it will bring to their industries. He described the current moment as ushering in a “completely new era” for the economy, one that requires a reevaluation of strategies and approaches.
In contrast to this upcoming phase, the previous supercycle began in 2008, in response to the global financial crisis. The Federal Reserve's drastic cut of interest rates to 0 percent aimed to stabilize the economy during a period of turmoil. This move led to a substantial decline in yields on Treasury bonds, compelling investors to seek higher risks for better returns. Consequently, capital influx into emerging markets reached unprecedented levels, with 2010 alone seeing investments totaling approximately USD1 trillion.
During this period, businesses capitalized on the environment of “supercheap debt,” leading to rampant expansion and hiring. Reports indicate that global non-financial corporate debt doubled to USD66 trillion from 2007 to 2017, facilitated by these low interest rates. Prior to the onset of the COVID-19 pandemic, both inflation and wage growth consistently remained below 3.9 percent.
The implications of this new supercycle are profound. As businesses and investors adjust to the realities of higher borrowing costs and economic uncertainty, strategic planning and risk management will become paramount. Experts like Josh Hirt, a senior economist at Vanguard, have noted that the era of cheap debt allowed for reckless expansion and hiring, raising concerns about the sustainability of such practices in a new economic landscape defined by higher interest rates and inflationary pressures.
This emerging supercycle is anticipated to be defined by elevated interest rates and increased volatility in both geopolitical and economic landscapes. Such conditions are likely to produce inflationary pressures that will reverberate across various sectors. Notably, national security concerns are expected to play a critical role in shaping industrial planning and supply chains, indicating a strategic shift in how businesses operate.
Silas Myers, CEO of Mar Vista Investments, emphasized to BI the transformative nature of this new supercycle, warning that many investors, lenders, and entrepreneurs may not fully grasp the significant changes it will bring to their industries. He described the current moment as ushering in a “completely new era” for the economy, one that requires a reevaluation of strategies and approaches.
In contrast to this upcoming phase, the previous supercycle began in 2008, in response to the global financial crisis. The Federal Reserve's drastic cut of interest rates to 0 percent aimed to stabilize the economy during a period of turmoil. This move led to a substantial decline in yields on Treasury bonds, compelling investors to seek higher risks for better returns. Consequently, capital influx into emerging markets reached unprecedented levels, with 2010 alone seeing investments totaling approximately USD1 trillion.
During this period, businesses capitalized on the environment of “supercheap debt,” leading to rampant expansion and hiring. Reports indicate that global non-financial corporate debt doubled to USD66 trillion from 2007 to 2017, facilitated by these low interest rates. Prior to the onset of the COVID-19 pandemic, both inflation and wage growth consistently remained below 3.9 percent.
The implications of this new supercycle are profound. As businesses and investors adjust to the realities of higher borrowing costs and economic uncertainty, strategic planning and risk management will become paramount. Experts like Josh Hirt, a senior economist at Vanguard, have noted that the era of cheap debt allowed for reckless expansion and hiring, raising concerns about the sustainability of such practices in a new economic landscape defined by higher interest rates and inflationary pressures.
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