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The Chinese Puzzle

This week we’re enduring another global market selloff triggered by weakness in China. How low will China’s economy and stock market sink? It’s a puzzle compounded by the country’s murky financial disclosure policies and dubious financial oversight.

But what we do know, with perfect clarity, is that when growth is tepid in developed economies and not that much better in emerging markets, you need a broad selection of investments in businesses with pricing power, and in businesses that are also underpinned by strong demographic trends.

Longtime subscribers to Global Income Edge know this is one of our main investment strategies, but I think it bears repeating given the current volatility.

Since the stock market rout last August, we have been predicting increased market turbulence. And in our October issue we discussed what could happen in 2016 and what investments would benefit.

The scenarios we prepared for have been playing out. The Federal Reserve raised rates, commodity prices have stayed low (in fact, oil prices and commodities have collapsed) and Europe is improving (domestic demand and growth has been on the rise).

What We Like

We believe U.S. domestic firms still offer great value, though we generally shun most U.S. multinationals given the strengthening dollar is making exports less competitive. And we’re still in favor of U.K. multinationals, which are highly diversified across the world.

But given the depreciation in the Euro, which makes exports there more competitive, as well as European central bank stimulus that has “no limits,” we continue to see the Continent as the top place to be in 2016. Particularly as many investments are still undervalued.   

We have long held various European financials and health care, though we would advise investors to be discerning, as not all European financials and healthcare companies are created equal.

For subscribers, in the upcoming January issue of Global Income Edge, we review the best income prospects in Europe and around the world to give investors that extra diversification and hopefully peace of mind.  

So when China’s markets collapse or the Dow Jones Industrials fall hundreds of points again, we’d like you to be confident that your Global Income Edge portfolio is making money. 

 


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