Bill Miller, Chief Investment Officer
On this week’s podcast (recorded January 7, 2016), Bill lends some insight into why markets have started the year so volatile, and what that means for the long-term outlook.
Two themes are at the heart of the current market weakness: (1) Chinese government has meddled too much with its market and currency and (2) Central banks have kept interest rates too low for too long.
- Stock prices are two to three times more expensive relative to Germany, U.S., Japan and others
- China halted trading (twice) so investor’s couldn’t get to their investments, causing panicked behavior among investors
- Officials manipulated down the value of the yuan in an effort to stimulate exports, creating more fear in investors
- Things must be weak enough where officials think that they have to stimulate exports
- Central banks around the world have kept interest rates near zero, but now that is shifting
- U.S. has raised rates and there is talk of raising them again in 2016; but Europe and Japan remain at near-zero levels, creating a credibility issue
- Investors now questioning why U.S. is going in one direction and Europe and Japan in another, and what that means to their investments
The combination of Chinese market manipulation and central bank credibility is surely causing fear, and perhaps some irrational investing, but it’s important to temper those voices. While the current volatility may take some time to pass, it feels more like a market correction and less of a large-scale economic issue.
Click here to listen to the audio recording
The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.