A silver lining to iron ore’s big tumble, page-13

There are currently dark clouds gathering on the horizon. Markets are increasingly being driven by one single factor which is monetary policy and central banks and the Fed are looking to taper quantitative easing support measures moving forward due to increasing inflationary pressures. When inflation rises so too do interest rates and any pricing of higher real interest rates in the period ahead will punish equity markets. Weakness is currently being led by China, which is suffering from recent COVID lockdowns, flooding, significant regulatory pressure and the threat of a breakdown in the highly leveraged property sector, exemplified by Evergrande’s likely forthcoming failure.The government’s aim to shift the economic model away from investment-fuelled growth towards something more aligned with CCP objectives suggests another credit cycle isn’t forthcoming, which will further disappoint markets.
Markets have been very robust, given the potent combination of vaccination, stimulus and economies reopening, but all three of those are running their course and with upcoming stimulus withdrawal, the economy is going to have to stand on its own two feet, something it hasn't had to do in quite a long time.