28 September 2015

Making Sense of Markets

Kevin Gardiner
2015, Palgrave Macmillan, 240 pages, £20.64
ISBN 9781137471383

Reviewer: Ian Harwood, Independent Consultant

The traumatic experience of the Great Depression of the early 1930s cast a dark and threatening shadow over economic and financial sentiment long into the post-WW2 period. As we are all painfully aware, the shock imparted by the severity of the 2008/09 global financial crisis has had a similar effect. Indeed, what Andy Haldane has recently described as ‘dread risk’ has heavily permeated the atmosphere and sapped confidence. As a consequence, the renewed global economic upswing that has taken root since mid-2009 has been afflicted throughout by chronic anxiety about what might go wrong rather than what might go right. And the purveyors of Apocalyptic ‘doomsday’ predictions have found a receptive audience.

And yet – despite such widespread angst – much has actually gone right since policy makers  averted the threat of a repetition of the Great Depression by doing the right thing almost seven years ago. Global GDP has long surpassed its pre-crisis peak, while financial markets have regained their poise. It is looking increasingly like a return to economic normalcy, with all that this implies for investment.

This, certainly, is the view espoused in Kevin Gardiner’s Making Sense of Markets.  Having worked in financial markets for over three decades – first as a sell-side macro-analyst and, more recently, as a buy-side investment strategist – the author has occupied a grandstand seat watching the fast-evolving global economy and even more rapid development of financial markets world wide.  The fruits of this rich experience are ably and enticingly distilled in this timely book.

Making Sense of Markets comprises two parts. The first focuses upon the macro-economic environment and questions why so many are still gloomy about what lies round the corner. The author argues that, on the contrary, it’s much more likely that we are facing the prospect of continued economic improvement – just as the global economy has done for centuries and, in particular, during the past thirty five years.

A brief review can hardly do justice to the extensive ground covered in the first few chapters. Suffice it to say, though, Gardiner offers an insightful and comprehensive interpretation of recent economic and financial history before presenting an upbeat view of the economic future. Especially engaging (and persuasive) in this latter regard is his demolition of a clutch of widely-entertained threats to future prosperity ranging from excessive debt, the demographic time-boom, resource depletion, Western ‘decadence’ and geo-political instability.

The second part of Making Sense of Markets seeks to draw out the investment implications of the author’s macro-economic view and is addressed, in particular, to the needs of the private investor. Nonetheless, professional investors are likely to find Gardiner’s extensive assessment of the multi-asset investment terrain of interest – particularly as he takes issue with much of what passes for conventional wisdom, whether key aspects of modern portfolio theory, CAPE or Tobin’s Q.

Overall, what is exceptional about this book is that it adopts an unashamedly ‘glass half full’ approach to the world which contrasts starkly with the generally downbeat and ‘worrywart-ish’ tenor of what is said by much of the media and other commentators. Refreshingly upbeat, well-argued and wide-ranging in its scope, this latest contribution to the investment genre is highly recommended.