Between trade conflicts, tweets, earnings reports, tweets, weak data, and more tweets, investors seem both exhausted and confused. And for good reason. As if the US/China trade situation wasn’t enough to ratchet up investor angst in recent weeks, next came the Mexico tariffs right out of left field. Then the market tumbled, then Powell hinted at a possible cut in interest rates to help steady the rocky ship. The current geopolitical environment is adding fuel to the fire, begging the question as to whether or not we may be reaching a tipping point with regard to nationalistic tendencies and, if so, what it could mean for global growth going forward. At this point, investors simply don’t know which way to turn.
In the face of the chaos, financial sages are warning investors not to succumb to fear or greed. “The markets are giving us a lot of information on a silver platter,” says David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates in Toronto. Well, yes, I agree, to a point. The markets are certainly moving in intriguing ways, but analyzing the trends has yet to yield a consensus forecast.
Despite the old age of the current bull market (and yes, we are still in a bull market), we believe the nearly 10-year-old economic cycle may have quite a bit left in the tank. Why? Because we are not seeing any warning signs from our favorite forecasting indicators that might signal the end of the economic cycle. That said, we are not complacent. We continue to recommend that investors adhere to strategic, long-term investment plans. We also believe that the current market environment opens the door for suitable investors to consider using any future volatility as an opportunity to add to their holdings of RAAI (robotics, automation & artificial intelligence). In its own growth cycle, RAAI is at a pivotal point, with all indicators pointing to inevitable, long-term, exponential growth. We advise investors to consider a thematic approach that focuses on four defining characteristics:
- Secular or structural shifts to the global economy
- Multi-year investment horizons
- High-growth opportunities
- Cross-sector implications
The old Wall Street adage predicts that, "As January goes, so goes the year." Unlike many old investing saws, this one actually has some history to back it up. According to the Stock Trader's Almanac, since 1950, when the market has made money in January, it has ended the year in positive territory 87% of the time. When stocks have lost money in January, the market has posted a loss for the year more than 50% of the time. And when stocks are up in both January and February, the historical odds of a happy outcome at year-end are even better. According to LPL Financial, since 1950, the S&P 500 has made money in the final 10 months in 93% of the years that January and February were positive.
At the risk of sounding like a broken record, investors who understand the long-term value of RAAI need to stay the course. We are entering a period of unprecedented innovation, growth, and prosperity driven by advanced technologies that are being applied to all industries and all markets. Among the biggest drivers of this dramatic growth are robotics and artificial intelligence. Investors who embrace this opportunity will happily look back on today’s uncertainty as the “good old days.”
By Bill Studebaker, President & CIO, ROBO Global