David Kotok, co-founder and chief investment officer of Cumberland Advisors, is “very worried” about the global economy. More specifically, says Kotok, he’s worried about “massive instability that’s brewing” among the world’s four largest economies.
He explained these concerns to ThinkAdvisor at this week’s Inside ETFs conference.
In the U.S., the world’s largest economy, the newly elected president is moving away from free trade policies, abandoning the trans-Pacific trading partnership and threatening large tariffs against China, the world’s second largest economy, and Mexico.
China is not a free-trade champion and could retaliate against the U.S. if it imposes tariffs on Chinese goods.
Japan, the world’s third largest economy, is feuding with China over the territory of several islands in the East China Sea and it is using fiscal stimulus to build up its defenses against China and maintaining zero to negative interest rates to boost a moribund economy.
The eurozone, the world’s fourth largest economic region, continues to try to revive its economies with low to negative interest rates and central bank bond purchases.
As a result of these macro concerns, Kotok told ThinkAdvisor he’s now holding large quantities of cash in portfolios: 40% cash in core portfolio and 27% in U.S. portfolios — both much higher than usual.