Global Investment Outlook

Charles Schwab’s annual IMPACT conference is an opportunity for independent fiduciaries to learn from the top financial planning, investment management, and business consultants in our industry.

This week we heard from Jeffrey Kleintop, Senior Vice President, Chief Global Investment Strategist and Liz Ann Sonders, Senior Vice President, Chief Investment Strategist.. 

After listening to the speakers, I came way with the following thoughts: It appears that the global economy is slowing, including here in the U.S. Leading economic indicators are weakening, and although the indicators are not signaling a recession yet, the slowdown that started in manufacturing is widespread.

While it appears investors are happy that the Fed and other central bankers cut rates, rates were already low and I don’t think monetary policy is the issue. Trade is. It would be nice to see the global economy get its second wind through successful trade deals and a Brexit resolution next year. Both are hard things to predict, so despite the potential need to be cautious you shouldn’t change your long-term investment strategy based on recession odds. There are also reasons to be optimistic about trade. Yes, we don’t have the big deal yet with China, but we are close with Canada and Mexico – two trade partners that are almost as large. Deals with two other big trade partners, Japan and South Korea, have been completed.

There are also some long-term trends to potentially take advantage of for the next decade. Recently, we’ve seen a shift in the markets that could play out for a while so investors should consider shifting their portfolios in these directions.

  1. Value has started to outperform growth after a nearly unprecedented stretch of growth beating value. For more on this, Don’t Ditch Your Value Stocks — The Boston Advisor.
  2. Large company stocks have started outperforming small company stocks.
  3. International stocks are outperforming US stocks after a decade where the opposite was true.