Hard and Soft Data
Pfäffikon SZ, Switzerland – Since the appointment of Donald Trump as President of America, investors are optimistic for the future. Strangely enough, many also feel that the U.S. is no longer the latest stable global safety net, which the U.S. was last century. Additionally, investors rely mainly on data that is soft as butter.
Wealth
The optimism is fueled in many sections of society. Paper-wealth –to have a feeling of being wealthy– makes people feel great but is based on quicksand. Beautiful outlooks and vague economic parameters to radiate confidence shine like stars in the sky. According to investors, the rising stock markets underline the good feeling and hence their expectation of extremely positive results. The positive centrifuge is in full swing, and everyone spins beside.
Centrifuge
However, when we look at hard data, it is difficult to keep the pink glasses on your nose. The economic expansion is crumbling; employment figures show increasingly erosion and production still not rebounds. Much hard data is still at a questionable level as during the last recession. Admittedly, the next four years, there is a probability that economic expansion attracts, but sparingly. Advancing protectionism can fade this positive data quickly to the background; not to mention the increased geopolitical tensions.
Investors have taken an advance on the future, which is not sustainable based on hard data. The likelihood of a big disappointment is undoubtedly present. Investors would be wise to make their investment decisions based on hard data. Also, it is advisable not to slide historic economic cycles under the carpet. “This time it’s different” has already led to many accidents.
It remains for me to wish you a good weekend.
Jan Dwarshuis is CIO at Thirteen Asset Management AG. Dwarshuis writes his columns in a personal capacity. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in above mentioned shares and has no intention of doing so in the next 72 hours.
