Note Précis July 23,2019: Renewed Ease, Renewed Market Subsidy- Prolonged state ownership of capital assets peaked in the late 1970s, to be unwound on efficiency grounds over the subsequent two decades. Freer market proponents need to consider efficiency risks as another arm of government now again expands in effect the prolonged subsidy of capital assets. From negative yield bonds to equities, markets appear once more to be opting for momentum from new quantitative ease led by Federal Reserve rate cuts.
In an environment of slowing growth and heightened trade tensions, currency volatility risk seems a reason to favor precious metals for diversification. Elevated geopolitical tensions appear from South Asia, the Korean peninsula and Levant violence now including the Persian Gulf. The U.S. debt ceiling extension and other fiscal developments worldwide still leave capital markets flows unsettled.
We see Real Estate exposure as underweight due to its already elevated status in response to quantitative ease. Equity markets appear sustaining index levels but punishing of individual companies demonstrating weakness. Response differences need watching on merely meeting very low consensus. We believe volatility is likely to be elevated. We espouse quality as well as diversification for instance by favoring leading financials, energy, precious metals and delivery information technology, rather than being concept/social media oriented. We also underweight consumer areas on traditional business cycle features (its present length notwithstanding) and new operating business challenges which are likely to make them early in feeling any downturn. StrategeInvest’s independent consultancy operates as Subodh Kumar & Associates. The views represented are those of the analyst at the date noted. They do not represent investment advice for which the reader should consult their investment and/or tax advisers. Any hyperlinks are for information only and not represented as accurate. E.o.e.