Claire Corlett

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Fisher Investments on Underappreciated Fundamentals | Capital Markets Update [2019]

Fisher Investments on Underappreciated Fundamentals | Capital Markets Update [2019]

What are some other positive fundamentals
that you feel are currently underappreciated? Well, I’d say there are a number of them. I mean I think the market has really been
focused on a lot of false negatives and not a lot on the positives of the world. And that’s not to say that the world is a
perfect place and there aren’t problems, there aren’t economic weak spots and those sorts
of things. But by and large, the global economy is in
very good shape. You look at global GDP growth and its been
growing at a very steady rate. You look at yield curves around the world
and despite all the fears about inverted yield curves and what that might mean for economic
growth, they’re positively sloped most everywhere in the world particularly if you look at the
global yield curve environment. I mean we’re in an environment today where
people get overly focused on their home countries and the monetary policy conditions there. But in reality, big banks, big multi-national
banks can do business all throughout the world and borrow and lend all throughout the world. So what really matters is, what’s the global
lending environment? What’s the global yield curve environment? That remains very positive. You look at purchasing managers indexes which
are just surveys of managers that basically ask, how’s your business going and how do
you expect it’s gonna go? Is it getting better or worse, staying the
same? Those are all pointing to continued expansion. You look at inflation rates everywhere in
the world, and they’re exceptionally tame. And that’s been particularly true in some
of the higher inflation countries in the world here recently. I mean even outside of the developed world,
you look at markets like China, Brazil, other emerging markets that historically have fought
real inflation problems, the global trend of inflation is a pretty significant deceleration. And what that’s allowed for is central banks
to moderate their monetary policies. We’re still in an environment globally that’s
still kind of a global Goldilocks scenario. You’ve got good growth, you’ve got falling
inflation, you’ve got good corporate results. And yet you’ve had all of this fear baked
into equity prices that had led to some short term negativity in pricing that we think creates
an environment for a strong bounce-back as people come to realize that their fears aren’t
as bad as they thought they were and actual reality is pretty good. If you ask most people, is global trade growing
or shrinking, their perception from kind of reading common media would be that it’s shrinking
when in fact, global growth has continued at a pretty steady pace to grow at about 4%
a year and by that I mean, the growth of globalness in trade, not all the stuff people talk about,
is strong, positive. Again, there’s pockets of weakness most of
which are tired to unique countries, specific things. We could talk about those if you’re interested. But, pockets of weakness don’t show the overall
trend. The overall trend is strong at a time when
people think it isn’t. That’s a tremendous positive. We always pay attention to the leading economic
indicators which is a very powerful forecasting tool. And what you see is in most parts of the world,
the leading economic indicators are high and rising. That to us says, good times, not bad times
ahead. You know, there’s a saying in investing, that
in the short term, the market is a voting machine. In the long term, it’s a weighing machine. And basically what that means is in the short
term, sentiment plays a big role in what happens with stock prices. They can push things higher or lower, mostly
regardless of what’s going on fundamentally. But in the long term, that weighing machine
feature really weighs out. Meaning, it’s really the fundamentals of the
market that end up driving things with a long enough time horizon. And I think what you saw last year kind of
speaking against everything we’ve said here fundamentally, last year all these positive
fundamentals were in place but that voting machine mechanism took a good fundamental
year and turned it negative. And so as we look ahead to this year, why
do we have confidence that not only are those fundamentals gonna remain strong, but maybe
sentiment is gonna turn around and people are gonna start voting the other direction. Well, I think as you look at the big issues
that people were worried about last year, whether it’s the fed, whether it’s the yield
curve, whether it’s trade, whether it’s China’s economy, you see a lot of reasons to think
we’re gonna get some relief from those concerns this year. We don’t know exactly what’s gonna happen
of course but already the Fed has changed its tone significantly. So, if you previously were worried about run
away inflation driving the fed to be very aggressive with monetary policy, inflation
expectations have come down, actual inflation data has been very modest, the Fed has moderated
its tone so there’s one issue that started at least to some degree to go by the wayside. With China and trade, we’re seeing the Chinese
economy continues to grow well. As mentioned, global trade is actually at
all time highs today. So that concern starts to fade. And maybe we get a trade deal between the
US and China, maybe we don’t. But in one way or another, that fear starts
to fade as well. And so you see a lot of opportunity for the
concerns of 2018 to at least lessen or maybe even reverse this year. And so on the back of that weighing machine
mechanism, that strong fundamental environment, you take those negative votes from last year
and turn them into positive votes this year, you can see how that can drive very strong
stock market results. And for views on current events in the world
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to Fisher Investments’ most current thoughts on capital markets and the global economy,
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