The Optimistic Case For Investors

The Optimistic Case For Investors

over 3 years ago2 mins

With many of the world’s wealthiest nations imposing new lockdowns to fight coronavirus and the US closing in on a quarter of a million related deaths, the world may seem a pretty depressing place at the moment. But there are also some bright spots amid the gloom – at least when it comes to the economy 🙌 

What does this mean?

Let’s start in the East. China’s economy, the world’s second-largest, grew 4.9% in the third quarter compared to the same time last year; it’s on course to be one of the global few not to have contracted over the course of 2020. If China can continue on its journey to becoming a consumer- rather than manufacturing-based economy, companies (and stock markets) around the world doing business with the country should get a boost in the coming years. 

Elsewhere in Asia, South Korea’s economy may provide an even better bellwether for buoyancy, thanks to its already advanced international connections – and overseas buyers are snapping up the cars, computers, and silicon chips the nation’s factories churn out. History suggests that the recent surge in Korean exports could bode well for confidence among international manufacturers, as measured by the Global Manufacturing Purchasing Managers’ Index (PMI).

South Korean Trade Data

It’s true that things aren’t quite as rosy in the rootin’, tootin’ US of A. But the proportion of junk-rated companies forced to default on their debts may have already peaked at 8.7% – far below the 11.2% forecast by ratings agency Moody’s in April. The Federal Reserve’s unprecedented promise to purchase company bonds seems, for now, to have largely achieved its goals of keeping companies solvent and people in work. With a few notable exceptions, to be sure…

US corporate default rate
(Source: Wall Street Journal)

What’s more, just look at the number of Americans deciding to start a new business 😮

US new business applications
Time to finally get that hard matcha startup off the ground?

Even as the virus continues to circulate, US investors have been steadily buying up stocks that stand to gain from looser restrictions on movement – in industries like airlines, casinos, and hotels – at the expense of sectors that profit from lockdowns such as etail, biotech, and home entertainment. That could be another sign of growing confidence during these uncertain times.

US lockdown stocks are doing badly

Why should I care?

While the world still feels far from OK, it’s actually surprisingly easy to find encouraging signs of economic resurgence out there. And that bodes well for investors. 

From traffic on Chinese domestic flights to UK house prices and even orders for brand-new Ferraris, hundreds of economic indicators are sitting back at pre-pandemic levels. That’s something to remember next time you’re doomscrolling social feeds or watching the evening news. 

US home and car sales
(Source: M&G, Bloomberg)

If all this positivity is rubbing you the wrong way, don’t worry: I’ll be back next week with a contrasting catalogue of some of the more concerning global trends to have caught my notice recently 😅

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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