Wealth effect and inflation support asset prices
The guest argues that a low-savings, high-asset-price environment allows consumers to dis-save and sustain spending, keeping the economy strong and asset prices bullish.
The argument
The guest notes that while real wages are lagging, extreme wealth effects from housing, equities, and other assets enable continued consumption. Furthermore, central banks' reluctance to aggressively combat persistent inflation acts as a structural tailwind for risk assets.
The thesis, stress-tested
✓ What validates it
- ✓S&P 500 sustaining all-time highs
- ✓Core inflation rising as headline energy inflation falls
▸ Risks discussed
- ▸Dis-saving has physical limits as asset pools shrink
- ▸Policymakers could eventually react aggressively if inflation becomes intolerable
- ▸Increased asset issuance could offset investment frenzy
Hear it yourself
"Things have changed a lot since then, obviously, in terms of what gets IPO'd and how the private markets work. But at the base point, that's what the markets are for. And so you have to start to ask yourself, so how what what is what is a good IPO look like? And there are so many constituents that matter. How would you score or read the SpaceX IPO? Do you think it went relatively well, or what was your assessment of that? Well, again, I think it has to be you have to look at the various interests of the various characters that are involved. In any transaction, the buyer and the seller meet at a price."
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