Synchronized
When I say the word “synchronized” what comes to your mind? Perhaps you think of synchronized swimming, the Olympic sport that we see once every four years for about two minutes, and sometimes see in commercials. As a former competitive swimmer, I am always amazed at the skills exhibited by these athletes.
Or perhaps your engineering mind thinks of the Mazda rotary engine – a synchronous system invented in the 1960’s and adapted for Mazda vehicles for over 40 years. Fun fact: A German named Wankel invented it. Mazda stopped making rotary engines in 2011.
Perhaps the word brings to mind the great music of The Police. Their album “Synchronicity” was released in 1983 and contained a number of big hits – “Every Breath You Take” was song of the year and “King of Pain” topped the charts for a while too. When the stock market is going through a period of decline, “King of Pain” is often played as the intro music for the evening financial commentaries. How appropriate.
Yesterday, when a client asked me why the markets had been strong, I replied “synchronous global expansion”. I don’t know where I came up with the expression. It just seemed to be the right way to describe what is happening around the globe as far as economies are concerned. And this morning, a client asked me how we were going to capture opportunity “at this stage of synchronized world growth?” His words, not mine.
Yes, folks, we are in a strange period when the US economy, the major European and Asian economies, and the developing economies are all improving at once. It has been a very long time since we have experienced such a phenomenon. How long? Well, Japan has been in a steady and painful decline since 1989. This decline stopped about fifteen months ago under Prime Minister Abe. Hence the term Abenomics. I remember 1989 very well; my first child was born that year. That was a long time ago.
But what does this mean for us? Let me suggest a couple of important things. First, growing economies improve the prospects for business and the stock markets until a destabilizing force emerges. Inflation, fast-changing geopolitics, a shortage of some sort or natural disasters are all possible destabilizers. Second, investors may choose to reward the change in growth rates more than the biggest growth rate. This is very evident right now and explains the strong European markets. And finally, it is really hard to predict how much growth will occur. Do you really want to venture a guess at the ability of the human race to innovate? I don’t.
My suggestion: review your portfolio objectively and determine if you are prepared to make progress in a period of growth. And by the way, this may last much longer than you anticipate. In fact, our market prognosticators think we started the second leg of a “secular bull market” earlier this year. Please don’t ask how long it may last (see prior paragraph).
Two quotes to ponder:
“One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute”. William Feather
“The Lord commonly gives riches to foolish people, to whom he gives nothing else”. Martin Luther
Historical Note: 500 years ago today, Martin Luther nailed his “95 Theses” to the door at the castle church in Wittenberg, Germany. It marked the start of the Protestant Reformation.
Happy Halloween!
Ralph McDevitt 10/31/2017
Views expressed are not necessarily those of Raymond James and are subject to change without notice. Information provided is general in nature, and is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Past performance is not indicative of future results. There is no assurance these trends will continue or that forecasts mentioned will occur. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success.
