two things:
–for almost two decades, there’s really been no reason for investors to bother with any stock market other than the US. This is in part because of political woes elsewhere–the continuing demise of Japan, Brexit, the rise of Xi in China. Mostly, though, it has been the economic strength of the US and the country’s role as the world’s technology center. Not so this year, however. The US market is a very distinct laggard.
–I get no sense that the downtrend in the US stock market, either in absolute terms or relative to other markets in the world, is close to being over. On the other hand, I get no strong sense from current stock price action that a lot more bad is still to come.
Two reasons for the latter.
The simpler is that a large portion of the earnings of the S&P and NASDAQ come from abroad. Companies are required to disclose this in their 10ks, but since this is commercially valuable information tend to do so in as unclear a way as they can get away with. Half is a reasonable guess, but for IT in particular it’s probably significantly more.
The other is that given that Trump’s tariff ideas are bad for the US economy–and that his failure to understand this is lost likely not a pretense (a scary combination)–it’s hard to assess how much of his program will actually get done. So far there seems to be no opposition at all. However, the market seems to be thinking that some will soon emerge.
what I’m doing
–I’m buying Hong Kong stocks for the first time in ages
–I’ve tilted my holdings toward you-can’t-fall-off-the-floor value names
What stocks do you buy in HK market? Should we worry about more tariffs and sanctions on China? Thanks
Thanks for your question. China was a terrible place under Mao. When Deng succeeded him, he shifted to “Socialism with Chinese characteristics,” i.e., capitalism, and there was a decades-long explosion of growth. Xi returned to Maoism, and the economy came to a screeching halt. Recently, Xi has moved closer to the Deng idea to revive a stagnant China–but only because he had little other choice. That has been good for Tencent and Alibaba in particular (I have small positions in both). China is still a risky place, for me anyway, both because Xi could change his mind tomorrow, and with the demise of Hong Kong as a financial center, it’s harder to get reliable information. However, given that his greatest success was as a reality show star, having Trump at the steering wheel in the US has, I think, raised the risk of investing here considerably, making China a little more tolerable The Macau casinos also appear to be reviving. I also think BYD is interesting, but one of Elon Musk’s main goals seems to me to be to prevent BYD from entering the US market through Mexico. Property companies, long the staple of China investing, strike me as very scary. I’ve bought the things I own in Hong Kong through Fidelity.
I should also emphasize that anyone who buys China stocks has to have a high tolerance for risk. If, for example, Xi were to revert to his former Maoist ways, my rationale for owning them would go up in smoke. more context: 80% of my stock money is in index funds. Around 5% of what I actively manage is in China stocks.