Our summary on a complex world

Without a doubt, we find the current state of the global economy more complex than perhaps at any other time in our 25 years of experience. Even a year or two ago, one could reasonably attempt to put together a presentation or a report of reasonable length in which one could attempt to “join all of the dots” into one hopefully coherent global view but we must admit that we are finding the current situation with its multiple themes hard to summarise in what we might describe as prose.

Therefore, in this monthly review, we have decided simply to list what we believe to be the most important features and themes within the global economy in a hope that we can at least give a flavour of the type of world that we have observed as we have lapped the world (more than once!) over the last month or so.

Our biggest theme and one that we suspect will come to dominate the investment universe as 2015 draws to a close is the abrupt and crucial sea-change that has occurred within the international capital flows balance of many of the world’s more important emerging markets. Many of the world’s emerging markets are currently suffering chronic levels of capital outflows.

It would seem that as developed world central banks have become less predictable with regard to their future policy actions, the “unprecedented levels of capital inflows” that plagued emerging markets between 2005 and 2012 have begun to reverse, in some cases quite violently. Hence, the chronic balance of payments surpluses that once characterised these regions have been replaced by deficits.