Economic data and commentary this week confirming what we have suspected for months now: the entire developed world (well, perhaps excepting the perpetually pushing on a string Japanese) is beginning to feel the effects of austerity.
Fed outlook, European PMI numbers, US unemployment, UK retail sales…all seem to point to a weakening expansion. A quick, off-the-cuff analysis might be that the busted debt bubble was too much for all of the global stimulus to overcome. In a strange way, analysts with views as disparate as Roubini and Krugman arrive at the same place – the difference is that the latter thinks more stimulus can solve (or at least help) the problem, where the former thinks it’s pretty nearly hopeless.
At the very inception of this blog, we began with the premise that getting the macro outlook on inflation/deflation rightly sorted would be vital to investing success. As of this writing, the deflationary winds are blowing as hard as they have at any point since the recovery got underway. My outlook has occasionally been lampooned over at Seeking Alpha for being unwaveringly bullish on Treasury bonds (until this week). At this point, I suspect my error may have been not being bullish enough.