The U.S. Economy and Markets
In spite of slight deceleration from the GDP growth rate posted in 2018, the U.S. economy continues to be strong, and we anticipate that as 2019 unfolds, growth will strengthen. U.S. markets have rapidly recovered from their fourth-quarter swoon, and while we believe that there will continue to be volatility in 2019, corrections will likely be shallow and brief.
The U.S. has about 7.5 million unfilled job openings, a decade-and-a-half high. Corporate profits are growing, and the U.S. consumer is healthy.
We are optimistic on the U.S., where our favored sectors and industries include the “usual suspects” — high-growth technology stocks in software, cloud, and AI which can save money for corporates and growth their earnings consistently. We are particularly alert for stocks which have been punished in recent months and whose prices have become more reasonable.
Asian and Latin American Opportunities
We are beginning to be bullish on China. As we often say, stock markets function as discounting mechanisms; we believe that Chinese growth will trough in the middle of the year, and then begin to reaccelerate in response to stimulus measures from the central government. Chinese stocks have been rising, likely in anticipation of these developments.
Within Asia, we see some opportunity in Japan and in India. While India remains a long-term growth opportunity, near-term developments will depend on continued progress in reforms from the Modi administration, and on local election news and dealmaking.
We are still bullish on Brazil. Although Brazilian markets have moved strongly since the election of Jair Bolsonaro in October, we believe that the new president will be able to move quickly to address pressing problems in Brazil, particularly entitlement reform, anti-corruption efforts, and law-and-order policies to improve Brazil’s disastrously poor public security. Particularly if he succeeds in reforming Brazil’s unsustainable pension system, international capital will applaud and will begin to flow back to Brazil more rapidly. We are attentive to opportunities also elsewhere in Latin America.
Europe
Some stocks in Europe are showing signs of life, but given the poor overarching business, financial, and economic conditions in Europe, we remain cautious.
Gold
We remain modestly bullish on gold and on some gold-mining shares. Many of the world’s central banks are stepping up their gold purchases. Even if progress is made in global trade negotiations, there is likely to remain an undercurrent of uncertainty which could encourage gold demand. Gold has underperformed for many years, and if the U.S. dollar remains cooperative, we could see further appreciation in gold this year.
Thanks for listening; we welcome your calls and questions.
