Wealth Management: Market Perspective – What will we leave behind? : Foreword
Kevin Gardiner, Global Investment Strategist, Wealth Management
“The biggest big business… is not steel, automobiles or television. It is the manufacture, refinement and distribution of anxiety.” - Eric Sevareid (1964)
There goes another big anniversary: the low point in the stock market slump that accompanied the Global Financial Crisis (GFC).
The intervening decade has been filled with cyclical and structural worries - double dips, debt deflation, financial repression and secular stagnation. But despite - because of? - those concerns, most assets have done well.
Stocks have performed especially strongly, and for clear, macro-related reasons: notwithstanding that wall of worry, economies and profits were growing, and interest rates and starting valuations were low. From the close on 9 March 2009, total returns for US stocks have been roughly 400%; and even Swiss and UK stocks have delivered roughly 200% (in local currencies).
In mid-2019, this may become the longest US expansion on record. This makes investors nervous. Meanwhile, profits have to slow sharply - much more so than economies - and US interest rates may eventually start to rise again. And after stocks' rebound - from the GFC and more recently from late 2018's sell-off - headroom is lower now.
Nonetheless, the absence of big cyclical excesses - in households, banks or consumer price indices - suggests little need yet for retrenchment or a more dramatic monetary normalisation. Profits may pause, but not collapse. And ongoing geopolitical tensions (in the UK, embarrassments) may remain manageable - from a narrow investment viewpoint at least. That headroom might still be enough, we think, to offer further inflation-beating returns over the next 10 years too.
In the essay below, we raise our horizon a little further and suggest that in contrast to the prevailing gloom about the world we'll be leaving behind, we suspect our children - like us - will likely be better off than their parents.
In this Market Perspective:
Foreword (current page)
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What will we leave behind?
Economy and Markets: Background
Market Perspective – What will we leave behind? (PDF 1.6 MB)
Marktausblick: Was werden wir hinterlassen? (PDF 1.6 MB) (German version)
Perspectivas de mercado – ¿Qué dejaremos a las futuras generaciones? (PDF 1.6 MB) (Spanish version)