“But as investors, we know that we shouldn’t be afraid when they come and go. So what I’m saying is, there will continue to be storms, but we will “I think we should continue to do that,” says Mark Matthews of Julius Baer. .
Global markets have rediscovered their rhythm for markets that were struggling two weeks ago, whether it’s China, the Middle East crisis or US macro data. Can we say that the storm has come and gone?
Mark Matthews: Can we say the storm has come and gone? No, of course not. There’s always a storm on the horizon. But as investors, we know that we shouldn’t be afraid when waves come and go, so what I want to say is that there will continue to be storms, but we will continue to invest. I think that we should continue. But have you ever been surprised by the strength of the world markets, especially the US market?While the Dow hit a new high last night and Nvidia hit a new high, you can’t argue that the US economy is slowing down. However, in some ways that is not a deterrent, at least for stock investors.
Mark Matthews: I’m surprised. We expected volatility in major US indexes to increase and decline further in the lead-up to the presidential election. And I think what’s happening is that the economic indicators in the United States were very good, as evidenced by yesterday’s strong retail sales and weak unemployment claims.
But there are several other data points that support the strength of the economy. Meanwhile, inflation is under control, as shown by the latest consumer price index readings. And in the third quarter results, banks were the first major sector to report, posting strong results.
And yesterday, Taiwan Semiconductor announced a 54% increase in profit over the previous year. Therefore, from there we can deduce that the artificial intelligence story is real. It’s not just a story. There’s real money behind it. That kind of thing is happening. However, I think it can also be said that the polls clearly show that Donald Trump will be the next president. And as much as his first administration was a mess, I’m not sure why a second term administration should be any different. This was good news for the stock market. Everyone knows that. The stock market was doing very well under President Donald Trump until the pandemic. And perhaps that’s why the market is so strong.
Is it the fear of who will be the next president of the United States? The Democrats are already on the record saying that if they return to power, they will raise corporate and corporate taxes, which could add to the instability. If corporate taxes rise, profits will fall.
MARK MATTHEWS: Well, that would require a so-called blue wave, meaning Democrats taking control of Congress, which is highly unlikely. The probability is in the single digits. So they can and should talk about this populist agenda. So it’s in their DNA.
They are supposed to be the workers’ party. But in reality, they won’t be able to do those things. I think the concern about the election was more that it was going to be so close that there could be unrest as the result was debated. But with polls showing Trump with a lead of more than 20 percentage points, the chances of such uncertainty surrounding the election are diminishing.
What do you think about this India-China trade or China-India trade?
Mark Matthews: Well, what I’m saying is that China will outperform India in the next six to 12 months. However, India will overtake China in the next six to 10 years. So it depends on your timeline. But I think something very interesting is happening in China right now. We all know that policy has changed by 180%. I don’t mind that the market has cooled down a bit, but I don’t think it should go up 30% in a week, and I don’t think the authorities want that. But clearly there has been a major change in their policy.
They now want to stimulate the economy and get the stock market up on a sustainable basis rather than having it go up 30% in a week, and stocks are still very cheap. I can name 40 large Chinese liquid stocks whose price/earnings ratio is numerically lower than their dividend yield.
And Peter Lynch, a Star Fidelity fund manager and value investor in the 1980s, said that if you could find a company whose price-to-earnings ratio was numerically lower than its dividend yield, it was an extremely cheap stock. I remember him saying that. . So, I’m not going to give all 40 points, but for example, HSBC, as you probably know, has a price-to-earnings ratio of 6.4 times and a dividend yield of 7.2%.
