A 30% RALLY COMING?
That’s what Burkhard Varnholt CIO of Zurich based Bank Sarasin is betting on. At a meeting in Hong Kong yesterday Varnholt expressed his optimistic outlook:
“If the next six months of the reaction to this turbulent crisis continue to follow the book of history, which is more likely than not, then that will suggest that equities globally still have another 20 to 30 percent upside from here onwards.”
Varnholt says investors are shifting back to real assets as paper assets continue to be devalued by money printing:
“We are witnessing secular real-asset inflation over paper assets that will last two to three years.”
They are underweight government bonds and overweight metals. Although Varnholt says real assets are likely to outperform he says the dollar is unlikely to fall much further:
“Fundamentally [the dollar] looks oversold. For it to decline further, we will need to assume, which we think is unlikely, that there will be coordinated dollar sales, or even a dollar crisis.”
These are fairly reminiscent of the Larry Fink comments from yesterday. The dollar has bottomed, money printing will continue, but you should buy real assets and stocks. Something just doesn’t add up there….
What if everyone is printing currency; then the dollar may stay relatively stable compared to other currencies while ‘real’ assets appreciate?
“The dollar has bottomed, money printing will continue, but you should buy real assets and stocks. Something just doesn’t add up there….”
It doesn’t add up, because they don’t want to destabilize the world economy by causing folks to fear the US Dollar. However, they think a currency crisis is likely, so they are proponents for hedging against such a situation. Eh?
“The dollar has bottomed, money printing will continue, but you should buy real assets and stocks. Something just doesn’t add up there….”
The trick is to find real assets that aren’t in a bubble and will hold their value … I don’t think all stocks count … only consumer staples, some healthcare, commodities, some tech, lots of business services companies, banks in commodity countries etc.. Obviously, if everyone shifted 10% of their assets to gold, it would soar, until the trade reverses. Similar with mining stocks … guess what their share of global market cap is? Very small. But luckily, I don’t think we have to go all in in gold and mining stocks.
It could happen. Elliot wavers may disagree. I am bearish on the short term, I don’t have any idea what will happen in the intermediate term. Maybe we continue going up. The long term…there will be more problems down the road.