Addressing The Jerusalem Post’s 10th Annual Conference, Clarity Capital’s chief investment officer Eran Peleg sat down with Bloomberg correspondent Gwen Ackerman to discuss the emerging financial trends of 2021 and the global direction central banks are heading towards in today’s digital age.
“We’re at a very interesting point in regard to the macro-economic environment,” said Peleg. “For the last ten years, even more, we have been living in an environment of zero inflation, zero interest rates.”
Peleg noted that if you go back to the 1990s, inflation was barely above 3%, but now looking towards the US or Europe, inflation rates are now running at around 4-5%.
“This is a big change, I think,” he said.
He went on to address the argument surrounding the notion that if inflation is now transitory, or if it is permanent, to which Peleg commented that it could be a little of both.
“We might not stay at these elevated levels, but still there is, I think, a good chance for higher inflation levels that we have been at for the last 10-20 years.”
He noted that some of that has to do with the demand being “quite strong” at this point in time, with governments spending trillions to support economies across the world amid the coronavirus pandemic, the labor market evolving alongside changes in work structure as well as the way companies are valuing their supply chain management within these changes.
And while these inflation rates have already skyrocketed, as demand has increased globally, interest rates are expected to increase further than it has in the past two decades.
Cash has already begun losing value, and at 4-5% interest rates, people will have to start rethinking how they manage their financial portfolio.
Within today’s digital landscape, and the popularity of cryptocurrency on the rise, central banks are also looking to digital wallet options for consumers.
Considering you can’t buy a cup of coffee with bitcoin, and the volatility of the currency, central banks are looking to digitize cash, rather than holding onto physical cash.
“Cryptocurrency are not really money, they failed the test of money and they are not really a medium of exchange,” Peleg said. “And as a measure of the value, it’s also problematic, we don’t have any products or services that are denominated in cryptocurrency.”
He noted that cryptocurrency could have a role as a stored value as a financial asset, however.
All-in-all, as the world evolves around it, so does the financial industry and the trends that tend to follow it, and within the ever-evolving landscape invites a plethora of new challenges that emerge day-by-day.
“These are issues that need to be discussed and will probably be discussed over the next few years,” said Peleg. “Uncertainty is part of our lives.”