Chicken Little Can Teach Us a Lot about Markets

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Is it acorns falling or is the sky truly falling? Acorns abound with the on-again, off-again China–United states “trade war.” Wait, was that another “no-deal” Brexit threatened by yet another U.K. prime minister? And Argentina’s S&P Merval index, which plummeted 48% in U.S.-dollar terms due to a major loss in a primary election by President Mauricio Macri – the actual election is in October. There are other “crises” brewing of course, not least Germany’s 2Q19 GDP contraction and a Eurosceptic frontrunner in the Italian election, which are rattling Europe’s financial markets.

These storms belie the structurally sound economy in the U.S. and abroad – no pervasive risk factor such as rising interest rates. Remember that volatility is normal and world events are always in disarray somewhere. In our view, the global economy is the strongest it has ever been; U.S. GDP is at record highs, as are corporate earnings. If it seems like the sky is falling it may just be a lot of acorns.

Please see page 5 of the Global Perspectives book for record high World GDP.

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