Like the real economy, finance is disoriented by recent economic and political developments.
Gold is at its highest, and long-term rates in Germany have risen as never before following the announcement of the stimulus plan. And even central banks are no longer certain of their views.

Long gone are the days when reading the decisions and expectations of central banks was enough to understand the future shape of the financial markets.

This loss of bearings has two dimensions

The first is the shift in the hierarchy between fiscal and monetary policies. Since Reagan and financial globalization, central banks have been the ones regulating the macroeconomy.
The framework changed when China entered into competition with the US on certain technologies, just before the pandemic. The US has long dominated global technology and generates significant revenues from it. Too much competition from China would weaken this structure.
The real blow came at the end of the pandemic with the shortages. The United States implemented a large-scale industrial policy. The economy was becoming local again and losing some of its horizontal vision. Tariff policies in the US and defense policies in Europe accentuate this bias.

Monetary policy is becoming dependent on government decisions. The pendulum, long in favor of central banks, is shifting direction.
Investors need to get used to it, and central banks need to accept it. But above all, we need to find a new balance. The world is less open and becoming more vertical. This represents a major shift for central banks. Reading the financial markets will become more complex.

The second rupture is linked to the political choice of the United States, which is moving closer to its historical enemy to the detriment of its allies Canada and Europe.
Can this form of isolationism be compatible with the use of the dollar and American assets as a safe haven? Certainly not. If the real economy is fragmented, the monetary and financial economy suffers the consequences. Do we need to invent a new framework, a tripolar world? It’s complicated, but what we know is that the dollar will lose its luster with the current policy. This is a terrible upheaval for investors.

Two final remarks.
The first is the White House’s desire to promote cryptocurrencies, even if it means putting them in competition with the dollar (sic). We don’t really understand the objective.
The second is the appointment of Michele Bowman as head of banking regulation on the Fed board. She wants to give banks back freedom to finance the economy. In the past, greater freedom has repeatedly resulted in banking crises. Let’s be prepared.

*My shortened remarks at the conference organized by l’Opinion