According to Origin AM partner John Birkhold, central banks’ influence over economic performance has lessened in recent years.
“Gone are the days when central banks could pull the levers and set global economies on the right course,” Mr Birkhold said.
“Their actions still have an effect, but they have clearly failed to resolve many of the fundamental problems facing world economies post-GFC.”
He warned that aggressively accommodative monetary policy could have negative consequences over the long term.
“Together, low interest rates and ample liquidity have allowed many struggling economies to put off addressing the difficult re-structuring decisions that need to be made,” he said.
“And more than that, I would argue that the actions of central banks are in fact creating some of the same economic conditions which led to the GFC in the first place.”
On the other hand, disruptive influences are becoming increasingly common in the global environment, Mr Birkhold suggested.
In his view, disruptive technology is “intrinsically deflationary”, threatening some industries while benefiting consumers.
“The consumer often wins as technology becomes better and cheaper, whereas previously profitable companies see barriers to entry diminish and previously profitable markets dissipate,” he said.
He encouraged investors to embrace firms that are likely to prosper in a deflationary economic environment.
“For my money, firms that are able to adapt and innovate will be the ones that will most likely create significant wealth for their shareholders going forward,” he said.
