Fiscal outlook - VP April 2024 Big Picture Discussion

This post is an excerpt from our April 7, 2024 market discussion video to VP clients. The full length, original video can be viewed here.

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Highlights from April 2024 Big Picture discussion:

• Investors now view inflation as the “biggest tail risk”, but leading data is telling a different story, aligning more with a “mini inflation scare” scenario. We view fading fiscal stimulus as the actual greatest risk over the next 6-12 months, with upcoming April tax receipts as a key sign post.

• History tells us fiscal deficits persist overtime in democratic nations, which raises long-term inflation risks. To combat these risks, the political path of least resistance is likely financial repression pending a major rise in social unrest.

• Commodities and real assets are the likely winners in this environment. This creates major structural tailwinds for resource-intensive Latin American economies that remain capital scarce.