Global Investment Strategy

GIS May 9 (The Fog of Noise)

Date: 2016-05-08 - Prepared by: The GISI

The currently low-level of real long-term interest rates should last much longer than most believe, which will eventually bring down equity risk premiums and push up valuations. The world economy continues to adjust to lower energy prices. Whether oil price settles at $30, $40 or $50 is essentially irrelevant, and the correlation coefficient between oil and stocks should continue to fall.
Most central bankers have observed that although domestic demand is relatively strong, exports are weak because of slowing global trade. This should not be a big concern because this (2016/2017) global recovery will be led by rising domestic demand in most countries, which will then spill into accelerating world trade growth. Not all recoveries are led by accelerating global trade.
Britain will present lots of very interesting, dynamic and lucrative investment opportunities in the second half of this year — whatever the outcome of the Brexit vote — and investors should start researching various asset classes now. Britain has a very agile and flexible economy, which adjusts quickly to most changes.
Most emerging markets are fairly priced. Many EM stocks, in local currency, are at historical highs and most of the good news is priced in.
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