Blog - Stratos Private Wealth

Signs of Global Recovery

Written by Jeff Brown | November, 2019

Time to Read: 4 Minutes |

At Stratos Private Wealth, we closely monitor global economic indicators to guide changes in client portfolios. Recently, signs of global economic recovery have emerged. A combination of much easier global monetary policy and a modest reduction in geopolitical risk (i.e., the U.S.-China trade war and Brexit) are likely partially responsible for the improvement.

The Global Manufacturing Purchasing Managers Index edged up 0.1 point to 49.8 for October. While readings below 50 signify contracting manufacturing activity, the index rose for a third successive month. This marks the longest streak of improvement since December 2017. Historically, the manufacturing PMI has bottomed out five months before global economic activity. If this pattern continues, it could imply a recovery either late this year or in early 2020.

In addition, easing monetary policy across the globe has supported growth. As shown in the chart below, over 80% of central banks cut interest rates as their most recent move. This is up from just 38% in January. On average, monetary policy tends to lead global manufacturing by one year, again setting the stage for recovery early in 2020.

Stock markets also benefit from liquidity. The chart below shows money supply growth—the Fed is pumping real liquidity into the system.

Historically, the stock market (excluding dividends) has climbed 11.85%, on average, when liquidity growth exceeded 1.5%. It is currently well above that at 10.7%.

We view these early signs of recovery as an opportunity to rebalance our portfolios and deploy some excess cash. This leaves us closer to our benchmark weighting in equities. This is not, however, a recommendation to get aggressively bullish on stocks. We still remain slightly underweight on equities and overweight on high-quality bonds while we continue to assess the (potential) global recovery.

Stratos Private Wealth is a division through which Stratos Wealth Partners, Ltd. markets wealth management services. Investment advisory services offered through Stratos Wealth Partners, Ltd., a registered investment adviser.  Stratos Wealth Partners and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only; and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.  To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.  Investing involves risk including possible loss of principal. Some of the information contained herein has been obtained from third party sources which are reasonably believed to be reliable, but we cannot guarantee its accuracy or completeness. The information should not be regarded as a complete analysis of the subjects discussed.