Wall Street's Best Minds
Greg Valliere: Investors Are Upbeat
There’s optimism about the economy. And while Trump is mocked, his policies are praised.
By Greg Valliere
Every few months we run this feature, because we learn so much from talking with investors, both institutional and retail. So this morning we will pass on what we’re hearing -- the consensus of investors, who provide a refreshing contrast from the Beltway mentality. Here goes:
There’s rising optimism over the economy, and virtually no one we talk with anticipates a recession any time soon. Not many investors are euphoric; they don’t anticipate a boom but there’s a strong belief that moderate growth is sustainable.
Donald Trump is widely mocked but his policies are praised. Most investors are savvy enough to divorce the Trump tweets -- which are viewed as childish -- from the generally pro-business climate in Washington, which is cited as a factor in the stock market rally.
Horizon Investments
Surprisingly, most clients don’t expect tax cuts to affect them much personally. But they anticipate a major plus for business, with much lower corporate tax rates giving the stock rally another leg up. No one seems to care whether the tax cuts pass in December or March; investors simply want the process to advance.
There’s growing unease over budget deficits. The $666 billion in red ink in the just-ended fiscal year is viewed with alarm, especially by retail clients. A surprising percentage worry that entitlement benefits -- Social Security and Medicare -- will eventually have to be curbed because of these deficits.
Intriguingly, a majority of investors would have no issue with higher interest rates; retail clients, eager for better yields, would actually welcome higher rates.
We never hear clients calling for Janet Yellen’s ouster. She’s associated with a roaring stock market and the economic recovery, so why fix what’s not broken?
Business execs we talk with have been complaining for over a year that they can’t find skilled labor, and recently they have lamented that they can’t find enough workers who can pass a drug test. Trump’s proposal to curb legal immigration is viewed with dismay.
There’s widespread exasperation over the Millennials, who don’t seem to accept the traditional pattern of getting a good job and buying a home. They have priorities that the older generations don’t understand.
Retail investors age 40 and older are beginning to plan for retirement. Everyone in our industry had better have good retirement advice, because it’s what clients increasingly want to discuss.
The only politician who gets good grades -- and whose reputation has improved this year -- is United Nations Ambassador Nikki Haley, the near-certain successor to Rex Tillerson at the State Department.
Unfortunately, there’s only tepid support for free trade, with a majority of clients in agreement that the U.S. has gotten fleeced, especially by China.
There’s a surprising fascination with faux currencies like Bitcoin, especially from retail investors, many of whom think this is the start of something big.
There’s little concern among clients over terrorism or ISIS or North Korea, but there’s uneasiness that the U.S. -- and the entire financial system -- is vulnerable to cyberterrorism.
Among liberal clients, there’s dismay that the Democrats have virtually no new ideas and an acute lack of fresh faces heading into the next presidential election cycle.
No one seems to care about the Russia probe. Despite strong antipathy toward Trump personally by a surprising majority of clients we talk with, very few favor impeachment.
Everyone hates Washington, it’s almost the national sport. There’s a genuine longing for bipartisanship but investors are resigned to the dysfunction and can live with it, perhaps as a form of entertainment.
That’s our summary of client attitudes. They’re a pretty optimistic bunch -- not euphoric, but cautiously optimistic. Sir John Templeton famously said bull markets begin with despair and end with euphoria; investors we talk with are not euphoric yet, which persuades us that the rally will continue.
Valliere is global chief strategist with Horizon Investments.
0 comments:
Publicar un comentario