Every time I do a stock market prediction update (see my predictive performance graph below), I can’t help but thinking about the “Big Meltdown’.
Not the ‘next recession meltdown’ but the climate stranding massive amounts of assets forever meltdown.
It’s when things get so bad with the climate that all the corporate assets producing unacceptable carbon emissions suddenly become valueless.
It’s not just combustion engines either, or energy sources.
It’s buildings, technology, business systems and intelligence, processes etc. So many things we currently ascribe value to, even why we value it, could suddenly become valueless.
There very well could be a tipping point. That will be the moment we understand all our physical and intellectual resources will be required to fend off the total melt down of our planet. If this occurs, any asset not contributing to this goal will become obsolete.
We are seeing some of this asset revaluation happening incrementally. Coal is an example.
But change is not fast enough.
Far too many vested interests, including Trump and Co. are fighting to suck profit out of a dying world economic ‘asset order’, to allow for sane and orderly divestment.
Conventional investments in our portfolios, the ones many of us hope to retire on, face massive devaluation risk. Smart bankers and investment advisors are thinking about this, but not enough.
It will happen. The only question is how. Massive incremental revaluation or devaluation?
I will write more on this in the near future, to help you avoid the worst of it before it comes.
Sustainabilty rant is over
Interest rates are stable and are going down if only a bit. That’s baked into the market, so no upside there for most of us.
Financials, housing, autos, and all that we borrow for should see decent growth starting within the next six months, look for bargins.
This growth will (likely) be offset by a number of factors.
Tax swindle effect is going, going…. gone
The US GDP is slowing because the Trump tax swindle which made companies happy drunk buying back all their stock, did little to add to the solid economic base Obama left the Orange Peel in office. That bump is gone. Now beware of the $1.2 trillion deficit left in its place as it begins to drag on the economy.
Chinese economy slowing
China’s low-level economic belly ache has produced anemic (for them) growth of 6.2%, almost 1% below what is considered ‘acceptable’ for economic and social stability. Cracks in their finance system, which bolstered growth for decades, does not help.
Trump will continue to threaten China in the run up to the election. This doesn’t make things any better for economic stability. Some thoughts:
We all know Trump’s threats are pretty much of the Trojan variety (and not the kind he probably never partied with). That is, like much of what he does, his tough tariff trade talk is largely (still) empty. In fact, as Paul Krugman recently wrote: the Chinese, amongst other countries, are recipients of billions in tax benefits from Trump domestic policies, more than offsetting trade losses.
So not much to worry about.
We also hear Trump’s advisors are telling him not to stir the economic waters. These advisors are increasingly dull as Trump rips through the B list of people willing to work for him, but this one really is a Duh.
So again, not much to worry about.
Inflation is not rising
Other than being a full-blown racist bully, Trump has nothing going for him except the economy, unless you consider hordes of GOP facilitators who are as flaccid as inflation will be in the coming year or so – just less than 2.1% is the consensus.
But I digress.
Few are calling for a recession, but if it does come, consensus has it more like a sniffly cold than a full blown flu (i.e., nothing to get our knickers in a knot about).
Unemployment and wage growth low
Unemployment is below what is consider ‘full’, and wages have seen some but really modest growth averaging less than 3% since 2016. Don’t count on consumer optimism to fuel growth or inflation.
Corporate profits were mushy at best this past quarter, and will continue in what should be a generally dullish few months ahead.
Personal debt continues to drag
Personal debt has risen for 16 consecutive quarters. This will dampen any chance for an unexpected burst of consumer spending and or inflation.
If Trump’s inept administration could actually deport, or otherwise cause illegal immigrants to flee the country, the labor market could tighten up a bit more. This could push wages up in some sectors and trigger some inflation.
But don’t count on it. GOP vested interests know exploiting illegals is a key to the low-prices Americans, both left and right, love.
No one talks about this much, but many businesses both large and small depend on illegal labor to remain competitive. Why? Poor wages, skimpy to no benefits, and who cares about bad working conditions for ‘foreigners’?
Again, I digress.
The presidential election
Since 1984, when Regan took Mondale to the electoral cleaners, the stock market averaged a gain of 5.2% in the year before a presidential election. This includes the recession laden years of 2000 and 2008.
Take out the hopefully once in a life-time pre-Obama (2008) election year, the average return was 9.2%.
What does this mean for you the investor?
If you are like most of the rest of us with a well-diversified, value stock laden portfolio, you can likely count on a decent year without lifting a finger. If you have highly sensitive stocks (e.g., small cap, speculative or emerging market stocks) you may want to sell and take out any profit you have in them now.
For active traders? Boredom. Your only hope for the kind of market madness that makes your motor hum is a monarchical triumph of some uniformed, misguided Trump policy.
Did I write that? I meant monomaniacal….Chances of that happening: 40%.
Final word on sustainable investments
As ever, I urge you to cleanse your portfolio of all the stuff that makes our wonderful world worse.
If nothing else, please check your 401k or RRSP to see if it holds any carbon dealing death company stock(s).
If it does, sell them now or write your fund manager instructing them to sell these stocks to the devil and get them to hell where they belong.
For your convenience, I have drafted letter below you can send your fund manager/ advisor. Click here to get your draft letter….
Want to Invest Like You Give a Damn?
Want to learn more about sustainable and responsible investment? Check out my book: Invest Like You Give a Damn: Make Money, Change the World, Sleep Well at Night.
… a primer on SRI, financial planning and the true meaning of life all in one entertaining, insightful, thought providing and factual book…
Coro Strandberg, award winning sustainability expert.