Rothschild Private Wealth: Market Perspective – Ten years after

Kevin Gardiner, Global Investment Strategist, Rothschild Wealth Management

The everlasting summer is fading fast, and we're back to school against a rather sobering backdrop: the 10th anniversary of Lehman's collapse, ongoing US-China tariff worries, an emerging market (EM) sell-off, geopolitical concerns - and with the longest-ever bull run in US stocks just behind us.

My personal take on the Global Financial Crisis perhaps differs from the conventional one. Shocking and shameful as the GFC was, I did not see it as a watershed for the global economy or capitalism.

If the financial plumbing was fixed, there was no reason why the world - though not the financial sector itself - couldn't move back towards business as usual. With the conspicuous exceptions of European and Japanese monetary policy, it largely has.

The economic climate remains relatively benign: a mix of ongoing growth with mostly subdued inflation, which is delivering healthy profitability alongside only modest interest rate risk (even in the fully employed US).

Stocks have travelled a long way, but strong profits growth means that the US market's forward price-earnings (p/e) ratio is little different to what it was three years ago.

A full-blown trade war can still be avoided, and the sell-off in EMs looks containable to us. The strong US growth that is helping normalise US interest rates and supporting the dollar should also boost many emerging economy exports - higher tariffs notwithstanding.

Those wider geopolitical concerns may also be more manageable than feared. Fashionable talk of democracy's demise seems premature.

Overall, then, historical echoes and more contemporary risks aside, we still see growth-related assets as the most likely source of long-term inflation-beating returns.

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