The Impact of Mega-Trends on Markets

Ben Hunt is portfolio manager of the TIG Procella Fund, a long/short equity hedge fund focused on the political, legal, and regulatory events that influence security prices. In this 2012 FOX Fall Forum session, Hunt examined the impact of European and US monetary and fiscal policy on world markets.

Some key takeaways:

• In the middle of a global storm of deleveraging, deflation and default. These storms occur infrequently, but when they do, things never just get better on their own. They usually result in a rewriting of the prevailing economic rules and take a decade to play out. 
• Crises of this nature follow a similar pattern of default followed by a policy response to maintain status quo (often monetary) that leads to political upheaval (e.g. European austerity riots, Occupy Wall Street, the Tea Party), a complete reset and finally growth. 
• Governments today are faced with existential threats such as insolvency and loss of power and are often acting in their own self-interest
• Fed Chief Ben Bernanke’s qualitative easing is forcing investors to go further out for yield, encouraging risk.
• Long-term investment view still possible but complicated by this environment.