The Myth of Equilibrium

Will we ever get back to normal?

Photo: Reza Tizz. Source: Morguefile

Everyone wants the economy to normalize—normal interest rates, normal economic growth, normal inflation. But we never seem to get there. Something always seems to come up.

Ten years ago, the wheels came off the bus with the housing boom and financial crisis. Five years ago we had a Euro crisis and fears of “Grexit.” Now it’s “Brexit” and the most bizarre presidential contest in memory. Economists are debating whether we’re in a “new normal” or secular stagnation or if the rising “gig economy” will turn us all into innkeepers and taxi drivers.

Some see the market as an evolutionary mechanism, gradually adapting to change. But I see it as a complex ecosystem, with stresses that come from invasive species, severe weather, over-harvesting, and all kinds of other factors. If you walk into a forest, nothing is really stable. It’s always in a transition from something old to a new new thing.

I don’t believe in a past, present, or future economic equilibrium. The economy we see is the economy we have to work with. The market is always shifting, violating the most nuanced and elegant models. The market doesn’t do elegance. If you want elegance, go see a tailor.

Douglas R. Tengdin, CFA

Chief Investment Officer

By |2017-07-17T12:21:55+00:00June 22nd, 2016|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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