by Bill O’Grady

History seems to move in broad cycles.  Beliefs come into and fall out of favor.  Despite evidence of these cycles, people tend to “forecast with a straight edge.”  In other words, we assume trends that are in place will remain in place forever.  And, thus, it can come as a shock to society when trends shift.

One key reason why people tend to be surprised by inflection points is because we are mortal.  Once we identify the trends in place there is an incentive to buy into those patterns.  There are pundits who warn us that changes are in the offing but they are often warning us well in advance of the shift, and thus can either become like “Cassandras” who always signal calamity or like “stopped clocks that are right twice a day.”

In Part I of this report, we will offer some observations about inflection points—points in history when conditions change and a new regime of policy and thinking becomes dominant.  These observations will lay the groundwork for Part II, where we will examine in detail what we believe are two coming inflection points.  As always, we will conclude with market ramifications.

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