Mitch on the Markets

May 18th, 2017

What Does a Global Growth Upswing Mean for Your Investment Strategy?

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Global economic growth appears to be in a broad-based, modest uptrend. The key words here, that have arguably been missing for a few years, are “broad-based.” Global growth in aggregate has been positive since 2009, but it’s largely been uneven. The U.S. has posted growth lower than our long-term average, China has been pushing forward close to 7%, while Europe and Japan have been stubbornly hovering in the 0-1% range for years. Emerging Markets, apart from China, have stalled.

That is, until now. Signs are pointing to a slight – and I mean slight – acceleration in global growth from all corners. Even Brazil and Russia, whose economies have been mired in commodity-driven recessions for some time, appear poised to grow again this year. Taken together, 2017 could end up being the first year since 2010 that the developed world and the developing world grow in sync. A rising tide may be lifting all ships.

Investors may want to use the opportunity to review your portfolio’s regional allocations. Perhaps it is a good time to run an analysis to see what percentage of your equity portfolio is allocated to the U.S. versus foreign countries, to see where you stand. Foreign investing is not for all investors, of course, and whether it is suitable largely depends on investment objective, risk tolerance, time horizon, cash flow needs, amongst other considerations. But for long-term growth oriented portfolios, there’s a case now for having global exposure – whether it’s via owning multinationals or via having direct foreign exposure as part of a broader diversification effort.

If you want help figuring out how you are currently positioned and what thoughts we may have for adjusting your strategy, please feel free to reach out to a Zacks Investment Advisor Representative for help at 312-265-9312. We provide investment advice far beyond the “cookie cutter,” one-size fit all strategies. We provide a customized analysis for every one of our clients, then use our independent market research and tools we’ve developed to design a customize investment portfolio based on your individual needs. We can take a look at your portfolio and talk to you about what you’re looking for, and what ideas we have.

Let’s get back to this idea that we may be seeing synchronized global growth for the first time in a few years. In Q1, data from most regions and particularly Europe was stronger than observed six months ago. For the first time in nearly four years, none of the 19 Eurozone’s economies experienced deflation, a sign that extraordinary monetary policy strategies may be wielding some positive results. The European Commission’s economic-sentiment index is running at its highest level since 2011, and the unemployment rate in the euro currency bloc is at its lowest point since the global expansion got underway in 2009.

Global trade also reached a seven-year high, even as protectionist sentiment has started to creep into the political discourse. Global trading hubs such as Taiwan and South Korea are seeing solid activity. While it’s true that President Trump lambasted NAFTA, the Trans-Pacific Partnership, and China’s trade surplus with the U.S. (amongst others), but the president appears to have retreated slightly from those positions in his first few months in office. Fears of a trade war are subsiding, and confidence abroad is returning. Global manufacturing orders are growing at the fastest rate since 2014 (though this is admittedly not a particularly high benchmark given the weakness observed over the past two years).

But, perhaps the most talked about story right now is Emerging Markets. Developing nations have been feeling the sting of the global financial crisis ever since it took place. Financing is already difficult for a country with budding capital markets and relatively low economic output (though high growth rates in many cases), and inflation is a constant battle. There is evidence, however, that current account deficits are coming down and that currencies in a few key countries are starting to strengthen. Again, these are early signs, but they’re good ones.

Disclosure

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This communication is for informational purposes only and nothing herein should be construed as a solicitation, recommendation or an offer to buy or sell any securities or product, and does not constitute legal or tax advice. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Zacks Investment Management, Inc. is not engaged in rendering legal, tax, accounting or other professional services. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney- client relationship. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal , tax, or accounting counsel.
Returns for each strategy and the corresponding Morningstar Universe reflect the annualized returns for the periods indicated. The Morningstar Universes used for comparative analysis are constructed by Morningstar (median performance) and data is provided to Zacks by Zephyr Style Advisor. The percentile ranking for each Zacks Strategy is based on the gross comparison for Zacks Strategies vs. the indicated universe rounded up to the nearest whole percentile. Other managers included in universe by Morningstar may exhibit style drift when compared to Zacks Investment Management portfolio. Neither Zacks Investment Management nor Zacks Investment Research has any affiliation with Morningstar. Neither Zacks Investment Management nor Zacks Investment Research had any influence of the process Morningstar used to determine this ranking.
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