Brenda Vingiello, Sand Hill’s Chief Investment Officer, joined Squawk Box to discuss her thoughts on the latest market trends and market outlook for 2025. This
From Stealth Bear To Big V
Published Date : April 26, 2016
Sand Hill hosted its first annual Forum back in early 2009 during the depths of the most severe financial crisis in generations, in order to provide timely insight and information to help address that difficult period. We have since then tackled other important related topics, ranging from risk management to behavioral finance to identity theft. This January, we returned to our roots in welcoming Jurrien Timmer, Director of Global Macro at Fidelity Investments, as our featured speaker to address the considerably volatile current state of the capital markets.
At the time of Jurrien’s remarks, the broad equity markets were already down substantially in the New Year, and yet it was unclear to him why the markets were “so sour”, in his words. He did recognize somewhat “esoteric reasons” for concern, including perhaps the most profound being policy diversions between the US and China; but economically-speaking he did not feel too anxious about China, even if that country’s growth rate is significantly lower than previously assumed. However, he did express concern about the potential for future liquidity problems.
This liquidity issue primarily involves China’s currency, the Yuan, which is pegged to the dollar. Thus, any interest rate tightening in the US causes the Yuan to rise, which in turn makes it overvalued. Coupled with any economic slowing, this could result in capital flight with wealthy Chinese pulling money out of the country. So, in his opinion, it is reasonable why Chinese officials want to devalue the Yuan and it is also understandable why they should want an orderly and controlled decline. In essence, the US and China (as well as the rest of the global economy) are very much inter-related and co-dependent, and both countries need to “thread the needle” – with the Federal Reserve tightening rates ever-so-slowly and carefully, and the Chinese easing and devaluing the Yuan in similar fashion.
Jurrien also commented on the classic “paradox of thrift” behind the recent decline in oil prices. Contrary to common belief, the financial relief from low-priced oil is not leading to greater immediate overall consumption, but it is enabling personal debt reduction in US households which, in turn, should provide longer-term benefits. Rhetorically, Jurrien also asked, “Are we in a bubble?” No, he answered. In his opinion, valuations are reasonable, and low interest rates also help justify prices. Indeed, he said, we find ourselves in stealth bear market mode not unlike 1994 when the Fed tightened and a sideways market masked significant declines in the average stock. While likely remaining choppy for all of his stated concerns, he felt we could see more widespread market recovery in due course, which explains the title of his talk, “From Stealth Bear to Big V”.
It is Jurrien’s belief that if the Fed continues to listen to the market, then maybe they will tighten less than their recently stated plan. Fewer rate increases this year (or possibly none), would slow the dollar’s appreciation and, by extension, the Yuan, which could serve to stabilize things in China. Finally, he closed by saying, “Don’t succumb to the ‘fight or flight’ response” which is ever-present in the capital markets. Instead, he emphasized the importance of personal financial and investment planning and the associated discipline to stick with such plans.
Articles and Commentary
Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.
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All video presentations discuss certain investment products and/or securities and are being provided for informational purposes only, and should not be considered, and is not, investment, financial planning, tax or legal advice; nor is it a recommendation to buy or sell any securities. Investing in securities involves varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular client’s financial situation or risk tolerance. Past performance is not a guarantee of future returns. Individual performance results will vary. The opinions expressed in the video reflect Sand Hill Global Advisor’s (“SHGA”) or Brenda Vingiello’s (as applicable) views as of the date of the video. Such views are subject to change at any point without notice. Any comments, opinions, or recommendations made by any host or other guest not affiliated with SHGA in this video do not necessarily reflect the views of SHGA, and non-SHGA persons appearing in this video do not fall under the supervisory purview of SHGA. You should not treat any opinion expressed by SHGA or Ms. Vingiello as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of general opinion. Nothing presented herein is or is intended to constitute investment advice, and no investment decision should be made based solely on any information provided on this video. There is a risk of loss from an investment in securities, including the risk of loss of principal. Neither SHGA nor Ms. Vingiello guarantees any specific outcome or profit. Any forward-looking statements or forecasts contained in the video are based on assumptions and actual results may vary from any such statements or forecasts. SHGA or one of its employees may have a position in the securities discussed and may purchase or sell such securities from time to time. Some of the information in this video has been obtained from third party sources. While SHGA believes such third-party information is reliable, SHGA does not guarantee its accuracy, timeliness or completeness. SHGA encourages you to consult with a professional financial advisor prior to making any investment decision.
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