Demand Deficiency

“Demand Deficiency” Shift In Em And DM

A short time ago people were writing thought pieces on the “demand deficient” environment, and other buzzwords like “secular stagnation”, but as time has passed, structural challenges seem more like cyclical trivia.  Just take a look at today’s chart and you’ll see the stark shift in the global economy that has taken place.

Q1 hedge fund letters, conference, scoops etc, Also read Lear Capital: Financial Products You Should Avoid?

The Chart comes from a recent edition of the Weekly Macro Themes report where I talked about the state of the economic cycle, policymaker hubris, transitory deflation, and volatility suppression.

The chart shows the IFO World Economic Survey responses to how much of a problem is ‘insufficient demand’.

Demand Deficiency

To be clear, if the survey reading were to be at 100 that would mean all survey respondents cited lack of demand as a problem.  So in other words, right now, lack of demand is close to a non-issue.  Said differently, things look pretty darn good in the global economy right now.

And it’s both emerging markets and developed economies which are seeing a clear shift away from the demand deficient environment.

The glass half full view of course is that this is a good sign, and earnings will only improve from here and risk sentiment will be biased to the bullish side.  Also, inflation will probably improve too, and wages will likely tick up.

The glass half empty view is probably that the last time we got to these levels was at the peak of the dot com boom and just prior to the financial crisis.  That’s because basically it’s a sign that the global economy is well progressed through the economic cycle.

If demand deficiency is not a problem, then it stands to reason that growth must be decent and inflation is a logical follow on.  This means higher bond yields and tighter monetary policy.  Which is basically my base case for the outlook from here.  At some point though higher yields and tighter policy will end the business cycle – as they have done so with regularity across the decades.  Until then, the music is still playing…

This article originally appeared as a submission at See It Market

**Note: if you would like a deeper level of insight and service, why not take a free trial?

Follow us on:



Article by Top Down Charts


Saved Articles

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Congrats! Are you a smart person?

We have an exclusive targeted & limited time offer for being a sophisticated and loyal reader.

ValueWalkPremium is a website and newsletter on the latest industry news much of which is not in the public domain and obtained via our sources.

We also have 10 years of resources on how to use this information to better your investment process.

Sign up for  today and get our exclusive content for 40% off. This is our second biggest discount ever!!

Use coupon code VIP20 or click on the button below

Limited time offer only ENDS 3/31/2020 or after the next 45 subscribers take advantage whichever comes first – please do not share this discount with others