The disconnect between market valuations and underlying economic durability is becoming impossible to ignore.
In his latest piece for Financial Standard Super, Talaria Co-CIO Hugh Selby-Smith discusses how the era of global integration, disinflation and expanding private balance sheets is being replaced by one of higher public debt and more interventionist government policy. This shift is critical because much of today’s market optimism rests on conditions that are unlikely to stick around.
“Earnings growth in large US companies has driven returns, but that growth has been closely tied to government spending and rising deficits rather than broad-based economic strength. In the United States, interest payments on government debt are nearing US$1 trillion, while total corporate tax receipts amount to just US$452 billion.”
The scale of public borrowing is key, as the gap between political ambition and fiscal reality has proven difficult to bridge.
“The now defunct Department of Government Efficiency and its limited achievements highlight how difficult it is for governments to meaningfully reduce spending. It’s less Department of Government Efficiency, and more Dead on Arrival, Hugh says.”
Hugh is the Co-Chief Investment Officer and Head of Research at Talaria, having joined the business in 2016.
He began working in international equity markets in London in 1999 covering a range of global industries and sectors at Kleinwort Benson and Goldman Sachs, where he was consistently recognized by the likes of Institutional Investor, Greenwich Associates and Thomson Extel for his work.
He subsequently joined the international equities specialist TT International where he was part of the six-person team responsible for managing the firms long only Institutional Funds.
Hugh holds a Bachelor of Commerce and a Bachelor of Letters from Melbourne University, and co-founded Talaria Asset Management in 2018.
