The so-called Misery Index, the inverse of a Goldilocks scenario, is at a record low. If this is as low as it will go, however, this would mean that things are only going to get worse from here.
The misery index plots inflation and unemployment as a measure of how the average citizen is doing.
"We expect the misery index to trough in the next year," Luca Paolini, chief strategist at Pictet Asset Management.
It will happen either because the Federal Reserve allows the market and the economy to overshoot and inflation rises, or "because the global economy enters a recession, a shallow one, but still a recession" and unemployment rises, he added.
At the moment, low employment means solid economic growth, which translates to good earnings growth. Meanwhile, low inflation typically results in low real rates and good liquidity conditions.
Sure, the Fed has been raising interest rates, but on the whole, global real rates have barely budged. But caution is advised.
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