Balancing Act (Part 4)

How do we invest in a rebalancing world? And what does it mean for investors?

One way to look at this is to study history. Just after World War II the US comprised a third of the world’s economy and half of its production. Surpluses were mammoth, but since we were coming out of the depression, free trade wasn’t exactly popular. So we led a restructuring effort and gradually brought down barriers. The result was volatile markets, but two decades of unprecedented growth. Is this possible again?

Sure it is. The recent recession has actually begun the global rebalancing process. Before the crisis China had 1/8th of its economy dependent upon exports to the US. They know that those days are behind us, as evidenced by their appreciation of the Yuan. The key to Chinese growth going forward is social infrastructure—putting health care and retirement systems in place so Chinese consumers feel free to unlock their savings and overcome the paradox of thrift.

Does that mean we should go out and buy the Chinese Proctor and Gamble? Maybe. But it also means that health care providers and tech firms could be strategic. But be careful! Investing in developing markets is risky, with gut-wrenching volatility in the society, economy, and stock market. But if you can stand the heat, that kitchen should be a pretty good place to be.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-05T20:01:26+00:00 August 5th, 2010|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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