- China's growth is slowing but in all likelihood will still be a driver for global economic activity. Anyone who has been in China lately can clearly see this is a country on the rise with a growing consumer middle-class. And like other consumers around the world, growing affluence results in growing spending. True, economic growth may not be at 15 percent per year but even a 8 percent growth rate this still qualifies as a growth story; a growth story companies like McDonald's and General Electric have noted in recent earnings calls. Other Asian economies recently reported solid growth in the first quarter of this year; Korea with 7.8 percent and Singapore at 7.2 percent. Economic strength in Asia, will aid the global economy. It won’t fix problems but it will help recovery.
- Inflation remains in check and the threat of higher interest rates is not currently present. The low cost of money will help both consumers and businesses recover from the great recession of 2008. If inflation kicks up this is a different story but at this point that has not been the case.
Like you, I read with interest opinions and stories about what might happen and intellectually digesting these perspectives is critical. Considering disparate views is wise.
But here's my perspective on how to read these stories.
Don't assume that because something might happen, it will.
Don't assume anyone's opinion (including mine) is truth of a predestined outcome. These are merely opinions to consume with skepticism and a balanced perspective. Invest on the assumption that any outcome can occur and you will avoid the fate of many investors who become far too euphoric or overly pessimistic.
As is usually the case, dogmatic thinking when investing usually leads to a huge win or huge loss.
And remember; conditions change and you must be flexible as the world morphs.
Don’t be permanently wedded to your initial views if they seem out of touch with current economic realities. As I have said in previous blogs; constantly reassess your views and recheck your arguments. Self re-examination is critical.
The goal of an investment strategy should be to hold onto a balanced perspective and invest so that your investment plan is survivable in case the unlikely occurs. Don't ignore fear but don't be a slave to it. Instead use it as a cautionary guide as you invest. Likewise, be wary of euphoria but do not ignore the positive arguments of the optimists. Integrate both perspectives into your investment strategy and make balanced reasoned judgments as you invest your portfolio.
In my view, that's what's required in the world as uncertain as we face today.
Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). He oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. Michael and YCMNET were ranked as one of the top 100 investment advisors in the United States for 2009 by Barrons. He appears regularly on CNBC and CNBC Asia and can be reached directly at firstname.lastname@example.org.