As Britain swelters in record temperatures, even hitherto healthy US banks and miners are starting to struggle through an equally difficult economic climate. They are not alone (see ‘Cost pressures cause jump in profit warnings'), and their grumbles about the worst environment in decades and warnings of tough times ahead illustrate the continuing challenges faced by markets and economies.
There are snippets of good news – UK dividends returning to their high 2018 levels and the risk of recession still in the balance rather than a dead certainty – but stock markets are not back on terra firma yet, and as we move further away from the pandemic, the direction of travel is not back towards the halcyon days of the pre-pandemic era. Instead, we are being ushered into unfamiliar and more volatile territory.
The way back is blocked, for now at least. The pandemic and years of generous quantitative easing support have bequeathed to the global economy a raging inflation problem, while the repercussions of Russia’s war on Ukraine are energy and food security crises. And as the extreme weather this week reminds us, we cannot rule out additional chaos, disruption and losses as a consequence of climate change.