The discussion posits that markets are no longer effectively pricing in future events. Instead, due to high uncertainty from geopolitics and unpredictable policy, they are waiting for concrete data and corporate earnings reports before reacting, as seen with Crest Nicholson and Reckitt Benckiser.
The UK is experiencing a stark disconnect between hard economic data and public sentiment. While indicators like PMI data and a falling budget deficit suggest underlying strength, consumer confidence has plummeted to multi-decade lows, driven by inflation and a weak housing market.
The UK government is attempting to compel pension funds to invest in specific asset classes, such as UK private equity, through the Mansion House Accord and a new pensions bill. This move has been met with strong resistance from the House of Lords, which has twice voted against granting the government these mandatory powers.
As pension funds are pushed towards private assets, the associated risks are coming into focus. The pension regulator has issued warnings about liquidity and the potential for significant losses on selling illiquid assets, while a paper from Sona Asset Management predicts a prolonged period of poor performance for the private credit sector.
Keep pulling the thread on Not Predicting.