David Dietze, managing principal and senior investment strategist at Peapack Private Wealth Management, talks about the U.S. presidential election and the impact on the market.
The unsustainable cost of the debt and impact of future growth has been highlighted by U.S. Federal Reserve Chairman Jerome Powell, and many others have remarked that the fiscal path is unsustainable. To be clear, for the reserve currency of the world, the new debt will always clear the market, the discussion is at what yield will it clear?
It’s inevitable that the issuance of bonds needs to rise and that will negatively impact the cost of capital and equity multiples. Today, the equity market is priced more for a soft landing and benign inflation. Markets will ignore these longer-term concerns for extended periods. With the election out of the way, we think that is a higher probability, but Powell is a dove and likely doesn’t do that. Note the uncertainty in my comments here – it’s too close to call.
In the long run, it should not be about market timing but more about longer-term outcome-oriented portfolio construction that gets us through periods like this of higher uncertainty. The equivalent U.S. Social Security Trust Fund holds an IOU from the U.S. taxpayer and no real assets.That said, looking in the rearview mirror, the top 10 stocks in the world , are almost 20 per cent and one massive bet on technology .