Narratives on my mind

Change the narrative. That thought kept running through my mind while I endured aggravation and congestion at the Charlotte airport this past weekend. Just because I dread the airport experience, doesn’t mean I have to be in an unpleasant mood. I can, in a nutshell, change the narrative. 

What is a narrative and why does it matter?…  There was a very interesting article in the Wall Street Journal recently, titled – “Can Freedom Survive the Narratives?” written by Lance Morrow.  According to Morrow, “We live in the age of supercharged story lines, most of which are demagogic nonsense.” What does that mean?

Whatever the issue, coming from either side of the political aisle, the narrative is dominated by hyperbole at best, and out right whoppers, as Morrow states, at worst. Polarization and divisiveness will not end until we stop launching and worse over, believing in whoppers. 

A narrative in today’s world is an agenda wrapped in a catchy phrase spewed forth incessantly for political gain. Often, narratives determine sentiment and sentiment impacts virtually every aspect of our economy and society.  That’s what a narrative is and why it matters. 

But who controls the narrative? Politicians, mainstream media, and social media are all jockeying to control the narrative. But is it possible for each of us to create our own narrative?  Thankfully, we can decide how we think, what issues we concentrate on, and even how we feel about them. We can analyze issues thoroughly and comprehensively from all different viewpoints. We can search for common ground, compromises and win-win solutions to any challenge. From this approach we can produce reasonable narratives in lieu of exclamatory soundbites. In the end, reasonableness can be unifying.

If we remain stuck where we are today, bombarded by whoppers, two things are likely to happen. First, people will tune out once they lose any semblance of trust in the narrative.  Second, extremists will dominate the political debate and whichever group is in control will force its agenda on everyone else. In short, we will lose our freedoms. Freedom to disagree and think independently. The narrative today is leading us ever closer to totalitarianism. We have to change the narrative. How we debate, discuss, and listen to each other needs to change. 

Inflation has been on my mind of late as well. The latest CPI number, at 4.2%, was shocking. It was the highest number in over a decade. The narrative from the Fed is that the inflation spike is transitory. Is it? Let’s look at what is driving inflation currently. The latest inflation data shows prices spiking in multiple areas, including housing, auto, food, and commodities. Shortages and logistical bottlenecks coming out of the pandemic are driving prices higher across much of the economy. Beyond that, wages are going up, as companies are struggling to find qualified workers. Meanwhile, the Fed has stated that it has tools to control inflation if necessary. A historical study will show that the Fed’s ability to control inflation, once it starts to accelerate, without causing a great deal of economic pain, has been woeful. I suspect that inflation concerns will linger for the remainder of the year and will continue to cause the yield curve to steepen.  This may help the financial sector, but it may be a head wind for the overall economy and the rest of the stock market.

The last thought worth discussing is the government policy of paying people not to work. The narrative on this includes the call for universal income and higher taxes on the rich to pay for it.  As we continue to move to a technology-centric economy, not to mention the inevitable disruption that artificial intelligence is likely to have on overall employment, the question that is being asked is – What do we do with the unemployable? Should we give people money to find meaning outside of work? As I have written about in previous editions, we also have to identify the potential unintended consequences of policies related to paying people not to work. This may be the defining challenge for our country over the next decade. Pursuing a career, coming home each day after a job well done, providing for one’s family has been at the core of our society since its birth. It has given life meaning. It has spawned dreams for generations. What could possibly replace that? 

Michael Kayes, CFA