Two wise men of global finance, John Lipsky and Nick Sargen discuss policies and investments in the Trump era.
WEALTHTRACK Episode #1502; Originally Broadcast on June 29, 2018
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- Former First Deputy Managing Director,
- International Monetary Fund
- Chief Economist, Senior Investment Advisor,
- Fort Washington Investment Advisors
One of the most difficult tasks that investors face is discerning the difference between the noise of the markets and the substance. It has become even more challenging than usual in the Trump era as the President disrupts long standing practices and relationships.
The President’s unexpected rejection of a G7 communique was a prime example. As theFinancial Times wrote it left closest allies in turmoil and threatened more tariffs.
Contrast that with positive news about the U.S. economy revving up, as The Wall Street Journal reported having more job openings than jobless for the first time since those records were tallied 18 years ago.
Last year when confronted with contrasting news headlines and political tensions the markets seemed to shrug it off and climb. This year uncertainty seems to be taking its toll as the markets became much choppier. As a recent Wall Street Journal article asked, are we seeing The Return of the Political-Risk Trade? The Journal cited a widely used Global Economic Policy Uncertainty Index, which tracks mentions of the words “uncertain” and “uncertainty’ in major newspaper articles about economic policy. It recently rose to the highest level in a year. In addition, according to a recent survey by Ernst & Young “Geopolitical instability is now the number one concern for companies investing in Europe”. In its last survey, taken in 2016, it was number five.
How much do politics matter to the markets? What is noise? What is substance?
This week we are fortunate to be joined by two of the wisest men in global finance. They were colleagues many years ago at Salomon Brothers and have remained close friends ever since.
John Lipsky Is Distinguished Scholar at Johns Hopkins University School of Advanced International Studies (SAIS) and Senior Fellow at its Foreign Policy Institute. Before that he served a five year term as the International Monetary Fund’s First Deputy Managing Director and during 2011 was its Acting Managing Director. He holds several other leadership positions at prestigious organizations including Vice Chair at the National Bureau of Economic Research. He received a PhD in Economics from Stanford University.
As did Nick Sargen, an international economist turned global money manager. Sargen is now Chief Economist and Senior Investment Advisor at Fort Washington Investment Advisors, an Affiliate of Western & Southern Financial Group, where he had been Chief Investment Officer. Sargen, who held several chief economist and strategist positions at major banks and investment firms is the author of two books, Global Shocks: An Investment Guide For Turbulent Markets, and his just published Investing In The Trump Era: How Economic Policies Impact Financial Markets
What substantive difference is the Trump presidency making to the economy and markets? That is the topic of our WEALTHTRACKdiscussion.
In our EXTRA feature on wealthtrack.com Sargen will share his observations of Chinese attitudes toward recent trade disputes from his recent trip there and Lipsky recommends what he calls the definitive book on the history of U.S. Trade policies, which should be required reading for current trade officials.
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Have a great weekend, a super Fourth of July and make the week ahead a profitable and a productive one!
CONSIDER ADDING A TRUE DIVERSIFIER TO YOUR PORTFOLIO
Funds that invest in local currencies and lets them trade freely
- Morningstar Recommends:
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- PIMCO Emerging Markets Currency Fund (PLMAX)
Global Shocks: An Investment Guide for Turbulent Markets[/one_half]
Investing in the Trump Era: How Economic Policies Impact Financial Markets[/one_half_last]
SARGEN: TRUE DIVERSIFIER
Currencies Move Independently of Stock Markets
- Choose a currency fund with a good track record
- Unhedged that invests in local currencies
No stock mentions in this episode.[/tab]
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LIPSKY: DEFINITIVE HISTORY OF U.S. TRADE POLICY
Influential international economist John Lipsky has been involved in numerous global financial negotiations over the years, particularly in his leadership role at the International Monetary Fund. In the midst of today’s trade disputes he recommends we all read one book so we are not doomed to repeat the mistakes of the past.
SARGEN: MESSAGES FROM CHINA
Economist and investment strategist Nicholas Sargen speaks all over the world about the topic of his new book, Investing in the Trump Era. He recently returned from a speaking engagement in China where he also did some listening.