Given a potential inflationary environment, we have taken great care to emphasize companies that we believe have pricing power because of the mission-critical or value-add nature of their products and services.
While valuations are high across the market, on a relative basis, they are still most attractive for international stocks. The pandemic has delivered a global growth shock, but in doing so, it has accelerated the timeline for mega trends such as productivity enhancement (robotics, automation, and software), e-commerce, electronic payments, and rapid drug development.
Up until almost every government announced “Big Bazooka” strategies to address the abrupt slowdown a quality-oriented portfolio outperformed. The stock market regime is likely to shift in the near term as massive government stimulus designed to prevent bankruptcy will do exactly that. Therefore, small businesses and poor-quality companies with dangerously high levels of debt will be bailed out.
Crises call for leadership. But leadership is not something that can be precisely defined. On an intellectual level, it combines an understanding of risks and opportunities, and a realistic assessment of one’s strengths and weaknesses. But it also demands a realistic vision of what the future holds and how to get there. And then leadership calls for the skills to communicate that vision and motivate your team to get there. Shirl Penney, a leader in the wealth management business, talks about leadership in the coronavirus crisis.
A recent study by Charles Schwab revealed that succession planning ranks last on the list of top priorities for RIAs. Moreover, 92% of firms are considering internal succession. As someone who has first-hand experience selling a business, my guest, Stuart Silverman, will explain why advisors are hesitant to part ways with their firms, how they can identify a successor and how institutional capital can help fuel succession strategies.
Progress on the trade front lifted the markets in Q4 but now comes the hard part.
Valuation multiples have been stretched to the point that stocks have failed to go meaningfully higher even as interest rates have come down. This means that there will need to be a recovery in leading fundamental indicators, and not just rate cuts, before equity markets can rebound sustainably.
Trade tensions continue to plague confidence about the trajectory of economic growth. Trade tension-induced cost pressures, disrupted supply chains, capital tied up in excess inventories, and the uncertainty which impedes business investment plans continue to be headwinds.
With U.S. equities now having outperformed their international counterparts for 11 years on a cumulative basis, there have been plenty of discussions on how expensive the domestic stock market has become. Yet, many investors seem reluctant to allocate to companies abroad, shrugging off elevated valuations for U.S. stocks and any negative news fairly quickly. In this webcast, we will share:
Global markets enjoyed a strong start to the year, marking a steep reversal from the downdraft that maligned the fourth quarter. Weak or decelerating growth in virtually every major economy, coupled with lingering overhangs from international trade frictions, have compelled the major central banks to adopt stimulative policies for the foreseeable future.
Business uncertainty resulting from trade frictions will continue to put downward pressure on economic growth. As a result, investor confidence may remain fragile (recent price declines appear to reflect this). Concerns are unlikely to dissipate soon, but we contend that international growth stocks represent a good investment opportunity.
The early part of 2018 was characterized by US equity market volatility. What stands out is the contrast with abnormally low volatility last year. The S&P rose over the 12 months of 2017 with a benign economic backdrop. We think true investment risk has probably declined since January as equity valuations are now at more normal levels creating more interesting opportunities.