You might be interested in this post at Evergreen Gavekal on the tremendous gap between the financial markets and the economic data. Here’s a snippet:
It’s no doubt been one heck of a run this year for investment portfolios, and even more remarkable is the winning streak paired with deteriorating economic data. A logical question from here is what will give way first? I think going back to why this happened is critical to understanding the larger picture. For the Fed and its pause, they basically conceded that the economy cannot handle higher rates. This is rather dubious with short-term rates at a piddly 2.5%. We’d argue that past shifts like this are reminiscent of 2000 and 2007, and tend to telegraph an upcoming recession. For now, markets continue to embrace a looser Fed. But rates are still up over the last few years and the Fed will continue to pare back its balance sheet, which still means tighter conditions. As for China, the cyclical industries most tied to trade have recouped their losses from late 2018. This situation seems like a classic case of “buy the rumor, sell the newsâ€, and the market is certainly not pricing in any risk of a deal failing.
The post is chockful of interesting charts and graphs.
This divergence is well documented. So here’s a question for everyone. In broad strokes (and since I don’t think we have any 20 somethings here) how should an over 50 – 55 person construct a portfolio?
Do it twice. You are an individual, managing your own portfolio. Two – you are a professional money manager doing same for a 50-55 yr old. If you are brave enough to play, think about it carefully.
I wish I knew. It’s outside my area of competence. If the present situation buffalos Bill Gross and Warren Buffett, I don’t know why I shouldn’t be cautious, too.