Since 2007, over two thirds of the world’s economic growth has come from China. It is thus critical to understand China looking forward. Fielder’s Chief Investment Officer, Steve Korn, and I have conducted extensive research on China over the past decade. We understand the nuance – or the “yin and yang” – of the country. There is both great opportunity and great risk.
On the one hand, we believe some of the greatest innovation and growth may well come from China in the decade/s ahead. On the other hand, we are cautious given what we believe is a debt-fueled real estate bubble that, in time, may dwarf the crisis felt by the US and Western markets in 2008.
You can listen to a replay of Steve and I discussing this subject in greater detail HERE.
Not Your Grandfather’s World
Is your portfolio stuck in the 1980's? Do you basically have your grandfather’s portfolio? Figuratively speaking, are you invested in Wal-Mart in an Amazon world?
Extending the analogy geographically, are you invested in GM without even considering Toyota? That would be silly, considering GM’s market capitalization ($53 Bil) is dwarfed by Toyota’s ($196 Bil).
Most investors are under-invested internationally. Consider that over half of the world’s stock market capitalization is comprised of companies outside of the U.S. Furthermore, three quarters of the world’s GDP is derived outside of the U.S.
Nevertheless, U.S. investors have allocated only ~16% of their portfolios to international stocks.* That equates to making an outsized “bet” that the U.S. will out-perform in the coming decades. Granted, in the past decade, that has been the case: US stocks have indeed outperformed international stocks.*
International companies, however, have been growing their sales faster than U.S. companies in the aggregate. And international companies are a better value. You can buy more earnings for your investment dollar.**
The next 20 years will surely look different than the last 20 years. Is your portfolio looking toward the road ahead? Or in the rear-view mirror? Let us know if you would like some help adjusting its view.
Yours in the Field,
Frank Byrd, CFA
*Per Morningstar research (estimate of investor allocation to international stocks is as of 2017).
**International companies, however, have been growing their sales faster than U.S. companies in the aggregate. And international companies are a better value. You can buy more earnings for investment dollar.**
Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein.