Be cautious of bond markets [outside of SA], switch from high growth stocks into value and dividend paying stocks, and hold some money. Here is the advice from Guy Monson, the primary investment officer at Sarasin & Partners in a presentation to attendees for the recent Morningstar Investment Conference in Cape Town.
The world can be a volatile place at the present time, thanks simply in an extraordinary economic experiment dubbed Trumponomics; but additionally due to Brexit uncertainty, an upswing of populism all over the world and China’s slowing economy.
In particular, US events are impacting the remainder of the world. The usa economy keeps increasing with a blistering rate and may even touch 4% economic growth this year. Assuming this is often sustained it will put US president Mr . trump in the super-league in addition to the likes of John F. Kennedy and Lyndon Johnson, who achieved annualised real GDP of 5.5% and 5.2% in their terms.
US unemployment reaches a 90-year low, consumer confidence in an 18-year high, and small enterprise confidence is a a 50-year high. Pretty much everything continues to be achieved while core inflation is at 2%. It is a far cry on the backdrop of ‘secular stagnation’ that characterised the very last numerous the Obama administration. “These numbers are really robust,” says Monson.
This renaissance is fuelled by fiscal spending nine years to the economic upcycle and on an obviously better scale (currently 0.75-1% of GDP) than any economic textbook would ever advise. “It appears that the president is deliberately running america economy ‘hot’ by injecting, with a decade, $1.5 trillion of tax cuts, and $250 billion of fiscal stimulus. It’s an extraordinary economic experiment. We’ve never seen anything as if it outside of wartime,” he states.
Is there something into it?
This has triggered an increase in US domestic investment (running in a robust 7.1% rate) and should, after some time, help with improved profits and taxes