Current Investment Themes and Views

 

Investment Themes

  1. •Monetary and government authorities will do everything they can to keep global economies from going into depression

  2. •Central banks in the western world are prepared to take inflation risks to promote growth

  3. •Some central banks that claimed to have an inflation mandate now have a nominal growth mandate

  4. •Governments in the west will promote inflation in order to improve the nominal debt ratios of private and public sector balance sheets

  5. •With monetary and fiscal levers exhausted, currency depreciation will become a policy of the west

  6. •To eliminate global imbalances and restrain bubbles in the East, Asian currencies will appreciate versus Western currencies

  7. •Nominal growth in the west over the next 10 years will be less than 5% as balance sheets are rebuilt

  8. •Inflation will be a larger component of that nominal growth as real growth will run at 2% type levels

  1. •Equities overprice prospective growth rates in the west and are about 30% over-valued. As liquidity is withdrawn and private sector credit continues to contract in the west, equity valuations will be increasingly driven by fundamental valuations, rather than the dynamic of liquidity.


  1. •Emerging market equities will suffer from any fall in western equities


  1. •Bond markets globally are expensive, particularly in long-dated maturities. They underprice fiscal deficits and inflation risks


  1. •Currencies in the west need to depreciate versus Asian currencies in order to make consumers in the east relatively better off versus consumers in the west

Investment Views