Rumours of ‘secular stagnation’ in global markets greatly exaggerated: Rothschild WM’s Gardiner

Investor caution is one of the biggest challenges wealth managers who advise them currently face – not, as might commonly be supposed, a looming financial meltdown or other calamity typically imagined by those with portfolios in need of looking after, according to Kevin Gardiner, Rothschild Wealth Management’s global investment strategist.

At a regular strategy briefing held in Rothschild WM’s City of London offices this morning, Gardiner said much of his time at Rothschild WM at the moment is spent  “trying to persuade people that a lot of the worries that they have about the global investment climate”, while not always unfounded in certain cases, “may be over-stated”.

With all of the emphasis on the currently low interest rates, the decline in Asia’s markets, the slump in the price of oil and other commodities and other concerns, Gardiner explained, investors are failing, perhaps understandably, to “take a longer-term view”, and consider, for example, the fact that the global economy, in real terms, “is now is roughly one quarter bigger than it was in the middle of 2008”, which was its pre-global financial crisis peak. Or, put another way, “the highest point the global GDP reached before the events of 2008 pushed us into the recession”.

“Even on a per capita basis – because of course the population has been growing [during that time] – it [the world’s GDP] is roughly one eighth larger than it was then,” he added.

“[And yet] the most common feedback we get from clients [now], when interest rates are low and the world is so uncertain, is, ‘isn’t it better just to sit in cash, and stay safe…How can the world possibly escape the many difficulties that it’s facing?'”

Although these investors don’t always use the expression themselves, Gardiner went on, what they’re talking about is commonly referred to by economists as “‘secular stagnation’, this idea that the global economy, particularly the developed economy, has gone ‘ex-growth’, and can’t grow anymore”.

“[But] the serious investment point here is that if we focus too much on the short term, we can miss longer-term opportunities,” he said.

“Because even though during the global financial crisis crisis there was much talk of us being in a low-return environment, and how investors needed to lower their sights, the reality is that the subsequent seven years have been one of the best investment periods on record for investing in large, blue-chip equities, and for holding bonds.”

Gardiner, a Welshman who has been with Rothschild Wealth Management since 2014, is known in some circles for having coining the phrase “Celtic Tiger” in a 1994 Morgan Stanley report, (a fact noted in Wikipedia’s Celtic Tiger listing). He is also the author of a 2015 book, Making Sense of Markets.

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