For investors, it is a very confusing environment as emotions are whipsawed by the movements of red and green on the screen. In the past year, media headlines were just as volatile, swinging from "recovery on the horizon" to "doom and gloom". But these are merely headlines and not realities. Investors should pause before they ride the latest mood swing or media reports promoting either view.
Australia and China just reported that their economies are not collapsing but are instead showing a resurgent growth that exceeds the views of pessimists. Off course a 10% growth rate in China is far below its recent five-year average. But should that be a surprise given the state of the global economy? And really, who are the experts that dictate whether current growth is surprising?
Frankly, whether global economic growth numbers are a surprise or not is irrelevant in the long term. What matters is how growth rates translate into global GDP and corporate earnings. Long term, emotions are irrelevant. Fundamentals are what matters.
I'm not saying to avoid assessing current sentiment. Short-term emotion-based market swings can provide opportunities for entry into positions that have sold off excessively. General Electric is an example of how a shorter-term perspective can excessively cloud one's long-term investment view. Shares of GE have been hit due to the overhang related to it's financial services unit. (Track GE Here) Still, we believe in the long-term it is well positioned to benefit from the recovery in global growth. Short-term sentiment can create opportunity.
Another current so-called surprise this week was news that Ford's sales were down 7% from August of last year.Assessing this requires a new, balanced view rather than an immediate assumption that things are going poorly at Ford . Our view is that Ford is on the right track despite a 7% drop in year-to-year sales. Ford's focus on fuel economy as well as a reduction in expenses is going to be a positive as this global automaker continues to expand its market share. So don't be surprised when current headlines a year from now are forgotten.