We expect bear market declines will cause valuations to look more attractive than they have for several years which may lead investors to move back into safe haven markets. Misplaced calls for monetary authorities to tighten may fade along with hopes of improved economic growth. Outside the U.S., we expect to see additional monetary support to shore up ailing economies. We anticipate additional easing to provide a backstop for excessive market declines in Asia and emerging economies.
Macro market risks, which were being ignored by investors, are becoming quite evident. Still overlooked, we feel, is the level of government debt that has piled up as economies struggled to fight off financial contagion. Economics 101 would suggest the tremendous debt burden incurred to keep financial systems functioning is a drag on economic performance even at extremely low interest rates. It’s clear to see these effects in China, Brazil and Russia as slow world growth compresses commodity prices. In the U.S., debt levels soared by 250% to prevent the 2008 Financial Crisis turning into a depression. We believe the low 2% growth rate is a clear expression of the drag $18.5 trillion of debt is having on the economy.
We would strongly suggest that investors should not “buy the dip” because macro and market risks remain elevated. We are not out of the woods yet by a long shot. When markets’ prices are reverting to mean value from overvalued levels, we believe “cash is king” and the safest way to protect capital. WBI’s process systematically raises cash as market risk increases to protect capital. When market conditions indicate risk is abating, our process will seek to become more fully invested to participate in positive market returns.
— IMPORTANT INFORMATION
Past performance does not guarantee future results.
The views presented are those of Don Schreiber, Jr. and should not be construed as investment advice.
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