Market summary: Buoyed by a very strong economy, U.S. stocks are moving ahead. It turns out that the trade dispute will only affect a fraction of 1% of U.S. GDP, writes Monty Guild Thursday.
And some industries and companies are coming to the U.S. for serious negotiations about trade barriers and intellectual property theft.
A rally may ensue in the beaten-down bank and export and industrial sectors, but longer-term it is the growth sectors which will reward investors. We favor big tech, (SPX), financial services, medical technology, software, specialty retail and video gaming.
The U.S. dollar remains strong, which is not a favorable situation for U.S. investors trying to invest abroad.
We recommend avoiding Europe.
We are not bearish on Asia, but we suggest investors keep tight limits on their Asian stocks until the U.S. dollar stops rising aggressively.
We believe that some of the underlying forces which could cause a rise in gold are gathering strength: modestly rising inflation, world political disagreements and currency disruption.
Cryptocurrencies (BTC-USD) and other digital assets also remain in a broad trading range; we would not anticipate a crypto breakout from current levels until anxieties troubling global stock markets begin to resolve themselves or be digested.
Measuring growth isn’t so simple. Even though economic growth is the basic force at work behind rising corporate profits and stock prices, it isn’t easy to calculate. The complex web of estimates, delayed data, and educated guesswork often arrives at an understatement of the growth that’s actually occurring.
Former Obama economic advisor Jason Furman notes another way to approach the estimation of economic growth, and it shows that the economy has been growing faster than headlines from the Bureau of Economic Analysis would suggest.
Looking at the risk landscape. While we’re aware of these potential trouble spots, we think that the current bull market is likely to provide strong returns to investors in its final phase. A time will come when rising risks should prompt investors to begin moving to the sidelines -- but we do not believe that time has yet arrived.
