US economy walks into new ‘supercycle’
Date
10/24/2024 8:55:15 AM
(MENAFN) The US Economy is currently experiencing a significant transition, entering a new phase characterized by elevated growth rates, persistent inflation, and geopolitical uncertainties that are poised to reshape global cash flows. According to a report by Business Insider, economists predict that this emerging "supercycle" will be marked by higher interest rates and an increase in economic and geopolitical volatility, leading to inflationary consequences across various sectors.
This new supercycle signifies a departure from previous economic patterns, with a notable emphasis on national-security concerns influencing industrial planning and supply chains. Silas Myers, CEO of Mar Vista Investments, emphasized the gravity of this shift, noting that many investors, lenders, and entrepreneurs have yet to fully grasp the profound impact this change will have on their business strategies.
The previous supercycle began in 2008, following the Federal Reserve's drastic decision to cut the key interest rate to 0 percentin response to the global financial crisis. This move created a low-yield environment for Treasury bonds, compelling investors to pursue riskier ventures to generate returns. As a result, a record influx of capital into emerging markets was observed, reaching approximately USD1 trillion in 2010 alone. During this period, businesses took advantage of low interest rates, resulting in a doubling of global non-financial corporate debt, which surged to USD66 trillion between 2007 and 2017. Prior to the onset of the Covid-19 pandemic, inflation and wage growth remained relatively contained, both staying below 3.9%.
Josh Hirt, a senior economist at Vanguard, noted that the availability of "supercheap debt" enabled businesses to overexpand and overhire, contributing to an unsustainable economic landscape. As the US economy navigates this new supercycle, it faces a complex interplay of challenges and opportunities that will require careful consideration and strategic planning from all economic stakeholders. The landscape is shifting, and adapting to these changes will be crucial for businesses aiming to thrive in this new era of heightened volatility and inflationary pressures.
MENAFN24102024000045015687ID1108815709
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.