Quarterly Investment Outlook: January 2020

/

SUMMARY

  • The Fed, ECB and PBOC are all following easy money policies. This is finally contributing to an increase in global liquidity, a condition needed for stocks to outperform bonds into 2020.

  • M2 money supply is growing at 7% yoy, accelerating to a 13% annual rate since September. This could cause general price level inflation to move above 3% in 2020.

  • Both oil and gas prices should move higher. Oil is benefiting from both an increase in the base decline rate coupled with slowing productivity, despite a 10% increase in well completions.

  • A solid expansion in the Leading Economic Indicators along with a steepening in the Treasury yield curve, suggest a U.S. recession is not probable next year. Weakness in manufacturing is being offset by firm consumer/services sector. Consumer confidence at high level

  • A weak dollar is the key to our stagflation thesis. U.S./German yield spreads are already trending lower, a necessary condition for a dollar bear market.

  • China is poised to lead the global recovery. We expect an S&P earnings recovery into 2020, but stretched valuations could limit gains in the S&P 500, a growth dominant index.

To read the full report click here