“People are trying to be smart - all I’m trying to do is not to be idiotic, but it’s harder than most people think.” ~ Charlie Munger.
Trend: This is a newer section we’re introducing from this month which captures our imagination of next big things in our lives, markets and/or business.
Electric cars and Tesla occupy that distinction in this month’s commentary. Just at the month end, Tesla launched Model 3, their cheapest ever electric car at USD 35,000 with a goal to produce 500,000 vehicles.
The pre-orders stand at 276,000 according to Elon Musk, the founder & CEO within two days of launch. Though, they’re notorious for their delays in delivery, they could probably end up with more cash issues this time. Watch out!!!
Terrorism: When the heart of the Europe was struck with terror attacks last month, the world markets remained unfazed - Was it a sign of defiance or an acceptance of such disasters is still unclear?
But, these attacks along with the recent events of deporting migrants by Greece and the voices gathering for Brexit are only adding woes to the borderless sustenance of Europe.
The continued rhetoric by Donald Trump, contender for Republican the US Presidential nominee is another nail drawing in for more protectionism. Of all, the central bankers in a bid to regain their importance in the scheme of things, are dangerously toying with the Negative Interest Rate Policies to prop up growth.
Italy: Europe and the world could soon wake up to additional financial risks posed by Italy. According to Euro stat, Italy comes 2nd in the debt-to-GDP ratio with over 132%, a tad below Greece which continues to occupy the top slot. Greece being only the 44th largest economy in the world has brought the global financial markets to the brink and what could Italy do being the 8th largest economy? Save your thoughts.
Fed: Last December’s policy statement and the dot-plot predicted 3 to 4 hikes in to this year but we at Wealocity had our concerns expressed and have cautioned to a maximum of 1 rate hike at the best case scenario but with a bias towards the zero interest rate i.e. rolling back the hike Fed has done last year. We still maintain this forecast considering the larger than the anticipated fall in the commodities and the stagnant inflation (US) despite the job growth.
China: As it struggles to transition from a manufacture-led economy to consumer-led, the forex reserves are evaporated faster than anticipated. The reserves reached to $3.3tn in Feb, a record $1tn has moved out of China in 2015. While the official deficit stands at 2.4% of the GDP for 2015 and 3% (estimated) for 2016, the Societe Generale puts it at 3.5% and 4% respectively.
What’s in it for you:
Equity: Domestic equities have recovered from this calendar year’s lows but ended up on net negative for the FY & YTD basis. As an asset class, these are attractive and staggered investments are recommended with top-up on dips. A good monsoon is all it takes to see your portfolios bulge.
Debt: FMP (Fixed Maturity Plan) are attractive considering possible further cuts in the interest rates in the coming quarters. Also, dynamic bond MFs could take advantage of the evolving scenarios. Any tax-free bond issues to be lapped up especially by the investors at the retirement door-step
Commodities: In our last update, we’ve extensively covered why crude hovers within the current range and we reiterate the bottom’s done. Gold fights to shackle it’s resistance but faces hurdle while the rest of the metals remain humbled.
Disclaimer: The views expressed here are personal and any investment decisions to be made in consideration with the risk appetite, timelines and needs with an assistance from an advisor.
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