Markets continue to price in stronger global growth, but history reminds investors that leadership stocks often endure steep drawdowns while recession risks can quickly shift the balance back toward bonds.
Here are three key macro themes shaping the current investment landscape.
1.Biggest Winners’ Greatest Losses
The most interesting aspect of this table is how massive the drawdowns (periods where the stock price declined from its peak) are for some of the best stocks…
Not only do you have to pick the right stock, but you have to be able to hold-on and navigate through sometimes catastrophic declines in your portfolio through the process.
2.Global Equities are pricing a much higher PMI as global growth reaccelerates.
Are boom times ahead?
(or does the red line catch-down)
3.Recessions hurt Stocks and help Bonds.
While there is some debate around the diversification benefits of bonds (usually based on wrong assumptions and poor logic), the next deflationary downturn will probably look very similar to the right side of this chart.
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