As Chief Market Strategist at Jones Trading, Mike O’Rourke spends his time studying price, flows and policy and the complex interaction among these factors. Getting his start in the mid 90’s as the tech bubble was gaining momentum and both the Asian Currency crisis and LTCM event would occur, he’s gained an appreciation for how impactful flows and crowdedness can be on asset prices in both directions. The study of markets is complicated by agents of price agnostic demand. Here Mike points to the era of activism and transparency among Central Banks in the post GFC era of disinflation. He makes the point that this period of inflation shortfall was likely driven by a 20 year cycle of globalization that has largely ended. In the aftermath is persistently high inflation and far less forward guidance from major Central Banks.
Presently, Mike sees the potential for more downside in markets, especially as financial conditions, while off their lows, could need to tighten considerably more in order for the Fed to push inflation lower. In terms of the tail risks on his radar, Mike worries about a multi-year unwind of excess resulting from the stimulus that went into the market in the period after the Pandemic. He also fears a potential showdown between Central Banks and market prices, especially the ECB and the BoJ.
I hope you enjoy this episode of the Alpha Exchange, my conversation with Mike O’Rourke.