Difficult Choices; Quality Opportunities
Difficult Economic and
Political Choices Lie Ahead
“Future shock is the disorientation that affects an individual, a corporation, or a country when he or it is overwhelmed by change and the prospect of change.”
Alvin Toffler, Futurist and author of the book titled “Future Shock”
We live in a world of global disequilibrium and distortions which are likely to be with us for many years, and for clients the key question is how do you preserve and build capital under these conditions? In 1970, Alvin Toffler argued that society was undergoing tremendous structural change from a technological and social perspective that would overwhelm people leaving them disconnected and disoriented. Some 46 years later, the rapid rise in anti-establishment sentiment in Europe and the United States reflects the frustration of many people who are experiencing lower living standards, growing income inequality, a loss of confidence in government and declining optimism about the future. In addition to these issues, the Brexit vote reflects a growing sentiment of loss of sovereignty and self-determination. Globalization and technological advances have not benefited populations equally leaving many feeling disenfranchised.
The global economy remains volatile and unbalanced, but in the face of the many challenges the S&P 500 and Dow Jones Industrial Indices continue to make new highs. In light of the current geopolitical, economic and social conditions, investors should expect the continuation of the historically low interest-rate environment. Low rates are limiting options for capital to achieve returns and pushing investors to seek alternatives. We would caution market participants not to make investment decisions today using only traditional investment thinking with respect to current interest rates and equity valuations given the characteristics of the global economy. In a growth-challenged environment, investors should expect the United States to remain among the healthiest economies with the U.S. dollar and treasuries continuing to be in high demand. The U.S. economy is improving as indicated by the strength of consumer spending and housing activity. Many U.S. corporations had previously lowered earnings expectations for Q2, and therefore are able to meet or exceed expectations leading to higher share prices. In our view, the outlook for current interest rates, inflation rates and corporate profits continues to create favorable conditions for the second half of the year for well-positioned U.S. businesses.
(Please see PDF for full Outlook)
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Brian P. Barry, CIMA
Portfolio Manager
A.R. Schmeidler & Co., Inc.
212.687.9800