Many investors and the financial media tend to get bogged down by volatility and “noise” in economic data releases. We prefer to look at a handful of big-picture indicators that have stood the test of time. And these indicators point to continued strength in the economy.
Investment correlations that favored passive investment strategies are likely to break down while the bull market nears its end, favoring strong pickers. Look to emerging markets for some of the best opportunities.
Four months into the year and the global economy is in the midst of synchronized growth that should allow it to grow around 3.5 percent this year. China’s solid growth, India’s recovery after the monetarization jitters and the eurozone’s stronger-than-expected growth have been the catalysts for the strong showing this year.
The current policies of the ECB were designed to fight deflation and financial fragmentation in the eurozone. Currently, though, stronger economic activity, easier access to credit, lower borrowing rates and weakening deflation pressures open the door for tightening, even if only gradual in nature.
Although the S&P 500 appears overdue for a pullback of at least 5 to 10 percent, we remain bullish on select financial stocks and would regard any correction as an opportunity to accumulate our favorites.
Investor talk has turned against the Trump Trade, and for all the wrong reasons. While a market correction is due, look to the sectors that did well during the post-election period to perform well–making pullbacks an opportunity to buy.
Incoming data reinforce our take that the US economy has strengthened. But technical warning signs and policy concerns mean investors who invest in specific stocks and not the broader market have a better chance of outperforming.
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