As readers have no doubt noticed, the stock markets around the world have staged major rallies since the December lows. Camarda thinks there are several reasons for that, all of which we’ve previously explored in this space. Still, in this ever-changing world, it is helpful to keep a watchful eye on the navigation markers, so let’s take another brief look at Camarda’s perspective on the investment course ahead as the waves ease and the sun breaks:
- Interest rates have been a deeply-feared (though much overblown) stock market headwind for a year or so. The wind has shifted with the Fed’s remarkable about-face, going from restrictive to accommodative in record time, and transmuting a headwind-slog into an easy tailwind cruise. Other major central banks are following the Fed and switching feet from brake to throttle. Trumps’s efforts to reshape the Fed by nominating folks like Herman Cain may even throw gasoline on the free-money fire. Mortgage rates plumb record lows anew, and those that missed them may want to scurry. Of course, low rates are good for stocks because they make non-stock investment alternatives look even more dismal, and because low rates are good for business by reducing expenses and giving consumers more loot to buy goods and services with.
- Recessionary fears, like the interest rate boogeymen, seem to have also been widely overblown. The economic pulse in the US and offshore worlds clearly has quickened. Notably the Chinese economy seems to be on the verge of a new tear, especially notable as the Trumpian Sino-special economic squeeze continues unabated, and treats of a tightening vise have not been retracted. The upbeat in world economic activity is indeed remarkable when one considers how sodden the wet blanket of the Trade Wars has been to the fires of commerce. The bound Genie of global growth roils and gnaws at the bottle, and the Fed’s flop/flip interest rate deflation may just loose the cork into a great whoosh of expansion.
- Finally, while The Great Deal of China remains a tangled work in progress, happy faces seem la mode du mois on both sides of the wrestling mat, with each corner grinning and echoing that a deal is close…so close. If this happens – and Camarda puts the odds at near-certainty by summer at the latest, if only to grease the skids of Trump’s Term Two run – the collective economic Genie will burn very bright, soaring on technicolor afterburners for long, long time.
It is hard to overstate how promising this trifecta outlook is for the world economies, and by extension, for stocks. The markets have bounced, hard, off the late 2018 bear market lows, and have been lately threatening to make new highs, even before the recession all-clear seemed recently to have rug. With fresh air in the collective market’s wings, it seems the blue sky’s now the limit. Camarda generally concurs with this assessment, though cautions the following proviso: by many measures, US stocks remain pricy, even with a booster rocket tailwind maybe kindling. For a long, long time, we have believed that US stocks should be bought very carefully, with a Scrooge-like flinty eye toward solid value, an approach Camarda’s endeavored to double down on over the past year. Elsewhere in the world, stocks are generally much better values. Stock investors’ allocations should be constructed – or adjusted – accordingly. Camarda clients portfolios, of course, already reflect this strategy.