Latest Blog: Beach Reading - 07/29/2021
Investment Insights are written by Angeles' CIO Michael Rosen
Michael has more than 30 years experience as an institutional portfolio manager, investment strategist, trader and academic.
Two weeks ago (13 August, No Panic (Yet)) I noted that the renminbi devaluation was officially described as a modest alignment with market forces, which may have been true, but that it was strongly indicative of protracted weakness in China’s economy. I saw no need to panic two weeks ago, but last week would have been more timely; the “(Yet)” part of the title came upon us with a fury. Yesterday, US stocks lost more than 3%, but the intraday move was cumulatively more than 25%, up and down 5,000 Dow points.
But US (or European) markets are not the drivers of this volatility, it’s China. When the world’s second largest economy, accounting for the majority of the world’s growth in recent years, falters, the ripples are more like massive waves pounding the shores of economies dependent on China’s growth.
China’s equity market is down 40% from its recent high, bringing all Emerging Markets down by 28% in the past four months. This is close to the 29% drop in EM in mid-2011, although not (yet) as bad as the 66% drop in 2008. While this is a substantial move in a short time, it only represents a continuation of the trend for the past four years: relative to the the US, emerging markets are off 50% (see Graph below: MSCI EM Index vs. DM and US).
Global growth, again, led by China, is softening, and that fact impacts the US economy. But it affects us to a much lesser extent than almost any other country. The most recent economic data remain supportive of growth: 65 consecutive months of job growth (the most since at least the 1930s), record auto production, and a strengthening housing market, as we learned this morning: new home sales are up more than 25% from a year ago, the average price up nearly 5%, and inventory down to 5.2 months.
The last week has certainly been volatile, and investors should expect these periodic market shocks. But the big picture for me remains unchanged: there is little risk of a recession in the US economy, the commodity supercycle ended a few years ago, government bonds offer no real return, and equities are in a structural bull market that will see new highs in the coming years. But we won’t get there without occasional (even frequent) jolts, which is what we’ve just experienced.
Happy Singles Day! 11-11-2014
11 November is celebrated in the US as Veteran's Day and throughout Europe as Armistice Day, marking the armistice ...READ MORE
Path to Progress 12-08-2015
Zimbabwe is a country of 14 million people. I've never been there, and I can't recall if I've ever met anyone from ...READ MORE
Most observers would agree that equities are rich (expensive, overpriced, etc.). Corporate profits are at record highs, ...READ MORE
We build portfolios of best-in-class investment managers across all asset classes. If you would like to be considered for our portfolios, please contact us using our manager inquiries form.
- MANAGER INQUIRIES
How Can We Help You?Institutional Investors
Fully resourced investment office built to manage sophisticated client investment programsPrivate Wealth
Personalized discretionary portfolio and wealth management services powered by institutional processInvestment Management
Rigorous process and a flexible platform designed to meet client needsArticles & Insights
Latest insights and perspectives from the Angeles teamContact Us
Get in touch