A Tour of the Global Economy: Outlook and Implications

presented by Garrett D’Alessandro, CFA, CAIA, AIF, Chief Executive Officer of City National Rochdale

–  Kelly Bretz, CFA, FSA, MAAA

With an almost completely packed room, Mr. D’Alessandro took us around the world macro-economically, and discussed key drivers for each region.  He also and touched on how the information shared impacted his firm’s strategic asset allocation.  His firm’s view is that global growth is generally alright.  This along with other factors including the shortfall in aggregate demand, China’s efforts to stimulate their economy as well as strong economic momentum in Europe and Japan, should help to keep inflation low.  Mr. D’Alessandro commented that the fundamentals of US are the best of any region, and that fears of China’s overinvestment are “over blown”.  Historical analysis suggests that the stock market should not be concerned with limited Fed rate hikes. Lastly, with possible wage inflation in the near future, he does have some concern over decreasing profits and profit margins. I found Mr. D’Alessandro’s presentation interesting and engaging, with much if not all of the information helpful as I consider current and future investment decisions.

– Mark Carlton, CFA, Trademark Financial Mgm’t LLC

Garrett D’Alessandro, the CEO of City National Rochdale Investment Management, gave today’s CFA Society Minnesota lunch presentation.  He went over the global economy and its implications for investment portfolios.  His thesis was that the global economic growth is okay now and will be stronger overall in 2016.  China is in nowhere near the tough shape that many people seem to believe, he argued, and the outlook for the U.S. is especially good. He came well prepared with visuals to back up his arguments, especially in the case of China.  3-4% growth is not a hard landing, he said, and the slowdown in growth is the healthy and expected result of the end of a massive infrastructure building program.  The shift is now toward the consumer, and the success of this is evidenced by 8-10% retail sales and wage growth.  Concerns over China’s banking sector are overblown, he argued, as he went into detail about their tiered real estate system.  Likewise a decline in stock prices should not be looked at as a leading economic indicator as it would be here in the United States, because the Chinese do not view their stock market the same way we do. Mr. D’Alessandro was also sanguine about the U.S. economy and market.  It is true that trend growth has slowed over the past several years, but that is due to secular factors such as productivity and demographics.  Citing Reinhart and Rogoff, he argued that debt crises always lead to an extended period of slower growth.  The U.S. consumer is in an enviable position, however, because overall employment and household net worth are at an all-time high.  None of the factors that traditionally trigger bear markets – soaring commodity prices, aggressive Fed tightening, extreme valuations, or recession conditions are present, he said.  He forecast a longer than usual business cycle. When asked about what his concerns were relative to the U.S. stock market, he conceded that rising labor costs could hurt profit margins. There were some markets he really didn’t like, however.  Europe is mired in a secular stagnation and unlike here in the U.S., employment and consumer incomes still haven’t recovered from 2008.  As such is still not a promising place to invest.  He wasn’t enthusiastic on Japan either, due to their high debt levels.

Brain Ways: Mental Habits to Improve Work Performance

Presented by Cindy Edwards, of Find Your Fit Career Coaching

-John O’Connor, CFA, Cherry Tree Investments

Cindy Edwards taught attendees how to improve work performance.  She gave practical tips for how to take care of your brain’s basic needs.  With its basic needs met, your brain can focus on positive outcomes and actually grow in size.  Here are some important things to incorporate into your day: focus time (make your brain do heavy lifting), meditation, down time, play time, connecting time, 6-8 hours of sleep, and healthy foods.  Fitting some parts into your work day, including play time, will increase performance.