It is not for most people a joyful Eastertide. The opinion polls across the developed world show an edgy dissatisfaction among electorates. Even in the US, which has been experiencing a much better performance than the UK or Europe, people think the economy is doing worse than it is.
And yet we are ending this first quarter with share prices at or near record levels. In the US the performance has been outstanding, with the S&P 500 index up more than 10 per cent this year.
German and French shares are up by similar amounts, and while the gain of the FTSE 100 index is only about 3 per cent, at least it is within fighting distance of the all-time high of 8,012 reached in February last year.
There is no easy explanation for this disconnect, except perhaps to say that the professionals are looking forward to a brighter summer, while the people will believe that when they see it. But this is a season for hope, so let me set out five areas where, if things turn out towards the more favourable end of the scale, that gap will narrow.
First and most obvious is inflation. It is falling everywhere, but given the battering consumers have received over the past two years, we need to get that number below 2 per cent to shift sentiment. As far as the UK is concerned, it looks as though we will get there in April or May.
On the move: According to the International Chamber of Shipping there are more than 5,500 container ships on the high seas
Then, number two, will be the pace of interest rate cuts. This will be a global movement right through the second half of the year, and it will be a completely new experience. We are used to interest rates falling because something has gone wrong: the coordinated declines after the banking crash in 2008 and the pandemic in 2020. Now they will be going down because something has gone right: inflation has been beaten, or at least let’s hope so.
Third, there is growth. We have just had confirmation that the economy declined in the second half of last year, the technical definition of recession. I expect the figures will be revised in a couple of years’ time to show there wasn’t a recession after all, but the bigger point is that as inflation falls real incomes pick up and that feeds straight into consumption. So it will be consumer-led growth, and if we are able to see living standards rise our mood will perk up.
Fourth, I hope the benefits of better financial conditions will flow through to the country as a whole. There is the specific matter of higher share prices showing up in people’s Isas, and in pension pots too. But there is also the wider issue that too many of the gains go to insiders, private equity houses, hedge funds and the like, and not enough to the mass of savers. That balance between public markets and private ones needs to be tilted towards ordinary people.
Finally, a more general hope. It is that global leaders will realise that they have to protect world trade. We don’t think of the extraordinary complexity of global supply chains, until an event such as the dreadful accident in Baltimore harbour reminds us how much we rely on goods shipped around the world.
Look at that stack of containers on the Dali – and it is an average-sized vessel, not the biggest. According to the International Chamber of Shipping there are more than 5,500 container ships on the high seas.
But this is not just a question of logistics, which generally work very well. It is also one of regulation, and that is where politicians have a massive responsibility to keep trade moving.
There is a silly spat right now with Canada, which may slap a 6 per cent levy on British cars shipped there, as trade talks seem to have broken down. That’s absurd. We are friends. Please sort it.
More generally, the whole global trade system is under threat, with talks at the World Trade Organization meeting in Abu Dhabi a month ago ending in disarray.
And that is my biggest hope: that politicians realise how much damage they can do. Global trade is not a zero-sum game. Our prosperity depends on it.
