Well, that was an exciting week in the markets! All three major US indexes started down on Monday following renewed global trade concerns and overnight protests in Hong Kong. The slide worsened mid-afternoon as treasury yields continued their tumble. However, Tuesday was a much different story after the U.S. delayed several Chinese tariffs through December. The announcement sent indexes ripping higher across the board.
If someone were to dive deep into the Evergreen Virtual Advisor (EVA) archives, they would stumble upon a publication from two years ago titled, “America is Great, Home Country Bias Ain’t.” The bulk of the article was written by GMO’s Rick Friedman and its main premise is that investors skew their equity exposure towards their home country. Americans who have invested in line with this idea over the past decade have unquestionably been beneficiaries as benchmark indexes including the S&P 500, Nasdaq and Dow Jones have all been on epic bull runs.
As is often the case in the current news environment, the endless headlines surrounding the relations between the United States and China overshadow the substance of underlying policy and provide little added value to the public. While this may make for good political theatre, it leaves many struggling to grasp what has been developing not just over the past year, but quietly for the past decade. In this week’s EVA, Evergreen Gavekal partner Louis Gave offers thought-provoking insights on the complex “trade war” being staged by the two countries. Louis—and the venerable Charles Gave, with his 50 years of investment experience—argue there are far bigger implications for the ongoing battle than just the balance of imports and exports. The following examines the events that have led us to this point, as well as the options that may be exhausted going forward.
Inflation is a fickle measure influenced by several economic variables. Over the last 100 years, the rate of price inflation in the United States has swung wildly, from upwards of 20% in the early 1920, to -17% a few years following, to a steadier rate in the low single-digits over the last 35 years.
Over the last decade, many investment professionals have been tested by two simultaneously occurring phenomena: the rise of passive investing and the stronger performance of growth stocks relative to value.
