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Focus on High Quality in Challenging Markets
It’s my thesis market returns over the next few years are unlikely to match what we’ve seen over the past decade. However, I’m also of the view that will create great opportunities for savvy patient investors who think long-term. This missive defines what is meant by “quality” investments – and the attributes investors should focus on. And if we are see a more challenging climate the next few years – it’s higher quality assets which will shine.
Relief Rally Likely to be Temporary
Despite the welcomed relief rally – stocks are not out of the woods. The uncertainty introduced from Trump has inflicted a lot of damage. Not only on the market and its earnings – but on investor, consumer and business confidence. However, the full extent of the damage will only be felt in the months (years) ahead. For example, Bankim Chadha of Deutsche Bank has reduced his target for the S&P 500 for the year, citing doubts over whether tariff policies will be abandoned before they have already driven the economy into a recession. This echoes what I said recently “we could already be in recession”
Trump Wants Lower Rates – Will He Get It?
Trump is demanding the Federal Reserve lower rates. However, Fed Reserve Chair Jay Powell – is having none of it (and nor should he). This is setting up another showdown between the President and the world’s top central banker… a repeat of what we saw in 2018. As we all know Trump is a real-estate guy. Property is a business that relies heavily on cheap money. And this is the same lens Trump is taking with respect to his growth agenda. But he may not get what he wants…
Will Common Sense Prevail?
For the past few weeks we’ve watched Trump double down on dumb. There are no winners from tariffs – only losers. Perhaps the biggest loser of all will be the US consumer… forced to pay higher prices for almost all goods. Is that the goal? From Trump’s lens – China has been “ripping the US off” for decades. Why does he think this? The President will cite the US’ ~$1T trade deficit with the Middle Kingdom… which has doubled in 5 years. But this isn’t necessarily a bad thing… here’s why