U.S. and Global Stocks
Big events are afoot in the world. The coronavirus outbreak is ongoing, and continues to grow, albeit with little direct impact outside of mainland China. Stock markets in the developed world have apparently resumed their advance, with the U.S. again touching close to all-time highs. Even Chinese shares have experienced a rebound. It is still unclear what the impact will be on Chinese GDP growth, and through that, on global GDP growth, but markets are sanguine about the risks, apparently confident in the willingness and ability of the world’s central banks to deal with any transient dislocations and volatility that are due to the epidemic’s disruption.
Whether this attitude is appropriate or not remains to be seen. For our part, we view the potential for further volatility as very real — not simply from the coronavirus outbreak, but from any number of other political, geopolitical, and economic sources.
How To Invest Now
However, we feel strongly that investors should not adopt a fundamentally bearish attitude at this juncture. Remember the fundamentals. The market cycle is fundamentally a credit cycle, and credit conditions remain unstressed. Economic growth globally, though it may experience transient weakness due to problems in China, is recovering from a mini-downturn which bottomed in 2019. Central banks have expressed their willingness to support asset prices, and the Federal Reserve’s balance sheet is expanding again. Earnings growth in the U.S. is modest but positive. Interest rates and inflation are historically low. Recession is getting nearer but is not imminent. Premature bearishness, we believe, would be a strategic error.
As the saying goes, “To those who have, more shall be given.” We believe that the ongoing growth stories — those driven by long-term social, technological, and economic tailwinds, which can grow through thick and thin — will keep attracting investment dollars. We repeat the list each week, so it’s probably unnecessary to rehearse it:- tech, particularly cloud, AI, cybersecurity, cyberdefense, e-commerce, e-sports, big data, and 5G, as well as biopharmaceuticals and medical technology, transport de-carbonization and battery tech, are at the top of our list. We continue to like the U.S. best, and to like the U.K. longer term, as it charts its own way post-Brexit — especially if an entrepreneurial culture there can be reinvigorated by out-of-the-box thinking.
We are a service business; let us be of service, and call us with any questions.
Thanks for listening.
