Thinking Fast and Slow, a must read

Stock markets around the globe today are once again going to be affected today by the news that Israel apparently launched a strike on Iran this morning. Although, as yet, details are scarce, and the extent of the attack is unclear, but is apparently close to the centre of Iran’s nuclear program. Political commentators will not take long to point to the possibility of tipping the region ever closer to an all-out war. Although early signs are that all parties are playing down the impact of todays events,.

Ahead of this news, stocks in the US continued to struggle once again last night, attempting something of a rally again on Thursday but, by the end of the day, again drifted into negative territory. Netflix, overnight, produced solid numbers and saw the stock slide 5%, further indications that investors are running low on appetite. US stocks are down almost 5% from their highs of a few days ago as two-year treasury yields are approaching 5% again as Fed members continue to pour lukewarm, if not cold water on the idea the Federal Reserve could cut interest rates in June. For almost two years, the US yield curve has remained inverted, one of the longest periods in history. Yield curve inversion signals an economy heading for a recession but is poor at the timing. Suggesting that, either by design or consequence, policymakers are historically slow to react to a weakening economy. The US is slowing down growth in the first quarter, which is likely around 2.8% year over year, down from 3.2% in the last quarter of 2023. The results of the latest Fed beige book survey of the economic outlook reinforced the view that the economy continues to grow at a modest pace, and inflation, if ever so slowly, now is tracking back on a downward trend.

A divergence between interest rate expectations for the UK and Europe is developing. Both Christine Lagarde and Andrew Bailey indicated this week that they will act independently of the Federal Reserve regarding interest rate policy.

On a slightly different note, two great men from two very different fields sadly passed away last week. Daniel Kahneman was a psychologist who won the Nobel Prize for economics. Thinking Fast and Slow is a book everyone should read, particularly if they want to understand how and why we react to different circumstances, how different parts of our brains work, and how often our natural biases influence our decisions. One chapter explains why stock traders rarely make money.

The other deadly Derek Underwood, a spin bowler unlike any other, closer to medium pace than most traditional spinners, sadly died at the age of 78. He was a true gent, who you would never know was a professional sportsman looking at him in the street, but he was one of the best at his art. England’s greatest-ever spinner is taking almost 300 test wickets.