As fifty+ year-old inhabitants of the developed world in 2018 there is no doubt that we have lived through a long period of extraordinary development that has dramatically changed and to date, improved, very many aspects of life. Middle classes the world over have become larger and wealthier. The digital revolution has informed and empowered the many to lay claim to a lifestyle that hitherto was reserved for the few.

Social and cultural developments have been enabled by broadly supportive financial markets at least until 2008. Overall the last thirty years have been characterized by a downward trend in interest rates and an upward trend in financial asset values. Government deficits have become the acceptable consequences of state intervention in capital markets. Crises have been met by Central Banks eager to cut rates and more recently to print money. Consequently recessions have, until now, been short, cushioned by an increase in debt levels that is historically unprecedented. Since 2008 the trends of the last thirty years have been challenged and the strains are showing. The real estate and private debt crisis in Anglo-Saxon markets have been joined by the structural problems in the Euro and increasing questions over the China model of economic growth. These issues are playing out against a backdrop of unsustainable levels of government debt in key economies, particularly the USA.

Global economic growth has stalled and there is no obvious catalyst for a reacceleration. Certainly demographic and productivity trends are not helpful. Against this background it seems clear that that the dramatic money supply growth of recent years will have to continue. There is no doubt in our view that one consequence will be the eventual return of inflation for the first time since the early 1980's. Initially this may be seen as a positive development but longer term risks will rise.

The picture is changing and the changes will not be good for the investment strategies that have dominated for the last thirty years. The capital market volatility of recent years will likely continue and buy and hold strategies will fail for both equity and bond portfolios.

There are always investment opportunities available no matter what the environment, however; it is inevitable that the opportunities of the next few years will be very different from those of the last thirty. Investment success will require great independence of thought and action.

Caliburn Capital Partners is structured to allow for that independence.



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