Bond investors embrace the 3 Normals

Economic growth


3 NormalsSometimes the blog gets lucky with its timing.  That was certainly the case when it spoke to the world’s leading bond investors last week.  Just an hour before, they had been shocked by news that US GDP had fallen by 2.9% in Q1, far worse than earlier estimates.  And nobody believed the official excuse that cold weather was to blame.

Even before this news, however, it was  clear that the mood was indeed quite different from a year ago, with many investors now very open to the blog’s suggestion that deflation could be inevitable.

Investors’ key worry was how the US Federal Reserve would manage to return interest rates and monetary policy to ‘normal’.  In response, the blog asked a simple question based on the two views of London in the slide above:

What do investors regard as ‘normal’?

  • “Was it the post-War period with a bombed out global economy and a Boomer-led surge in demand causing major inflation?
  • “Was it the SuperCycle period of dis-inflation as the Boomers got into jobs and boosted supply whilst keeping demand steady?

And then it followed up with a description of today’s third Normal:

  • “Was it today, when increasing life expectancy means deflation is inevitable as demand slows whilst supply continues at previous highs?”

It is fair to say that the blog has had many enthusiastic responses when speaking about these issues in recent years.  But this time, it was almost overwhelmed with interest when the session ended.

The concept soon became known as ‘The 3 Normals’.  And many people expressed the view that this was the type of issue that investors needed to focus on in the future.  It also led to important discussions about how to adapt company thinking to today’s New Normal.

The key concern for many people is that their working lives till now have been dominated by the Boomer SuperCycle of constant growth and dis-inflation.  It is therefore very hard to readjust.

In response to this widespread concern, I explained how the late 1980s had forced all of us in my then company, ICI, to go through the opposite transition:

  • We began to worry we were missing opportunities by being too cautious and always fearing the next downturn
  • So we had to go through a cultural shift, where we began to assume a downturn might not be about to occur
  • As a result, we developed the phrase ‘stretch targets’, to remind ourselves to be bolder whilst still protecting the downside

It wasn’t easy for us to make this leap then.  And it certainly isn’t easy to head off today in a completely new direction.

But as we discuss in Boom, Gloom and the New Normal, those companies and investors that successfully make the transition to today’s New Normal will be the Winners in the years to come.


The blog's 7th birthday


Who would have believed the blog would still be here, 7 years after it began wit...

Learn more

$15bn gold loan scam revealed: Beijing property sales fall 50%


Almost every day brings new revelations about the growing evidence of major fr...

Learn more
More posts
The New Normal for global industry

The global chemical industry is the third largest sector in the world behind agriculture and energy,...

Debt, deflation, demographics and Brexit set to challenge London house prices

London property websites haven’t used the word “reduced” for many years. But it...

The bill for two decades of doomed stimulus measures is due

The Financial Times kindly made my letter on the risks now associated with central bank stimulus the...

Local supply chains replace global trade as world starts to “do more with less”

Something quite dramatic is happening in the global economy.  Of course, Wall Street analysts still...

Financial markets enter their Convulsion phase

Many companies and investors are still comparing today’s downturn to the 9-month hiccups seen afte...

World risks moving from Denial into Anger as the Paradigm of Loss moves forward

The head of the IMF has warned again on the likely scale of the economic depression ahead: “Gl...

The world has wasted 3 months – there is little time now left to avoid a Covid-19 catastrophe

It is now 3 months since China’s state television broadcast the first news of the Wuhan virus,...

A new recession era to emerge

Contingency planning has become mission-critical. The longer the coronavirus pandemic continues, the...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more