Last week we spoke with well-known money manager Louis-Vincent Gave out of Hong Kong to discuss his outlook on the markets and global economy. Here are a few excerpts from his interview that recently aired to our subscribers (click here for audio):
What's your take on Europe? Do you think it's headed back into a recession?
"I think there's no doubt about that frankly. Italy is in recession. Germany is in a technical recession, although not a very big one. France has had two consecutive quarters of zero growth...So what we have in Europe is a sort of stabilization at low levels of economic activity—a stagnation that is very reminiscent of what occurred in Japan over the past 20 years."
Do you think the European Central Bank's stimulus efforts will work as they did in 2012?
"To be honest, I don't think so...I think Europe's bigger problem is frankly one of competitiveness...As long as that's the case, it's hard to see investment pick up and without investments you don't see productivity. And without productivity you just don't see growth."
In the U.S. we've seen the dollar rally quite strongly over the past couple of months. What implications do you see this having?
"I think there's a couple challenges for the U.S. going forward. One of them indeed will be the strength of the U.S. dollar, which may be a headwind for some, but not for all business. For example, consumer focused businesses may benefit in that a stronger dollar leads to a rising disposable income for the U.S. And so that's usually a positive...but, by and large, a higher currency—combined with the fact that the Fed is done tapering—means less excess liquidity coming into U.S. markets so it could make for a much more challenging environment for U.S. equities—an environment where the potential for earnings disappointment is high."
How do you play this current market?
"I think you go where the growth is. And today the growth is in Asia...The way I tend to look at markets is I look at them through five prisms. I say, okay, is growth accelerating, decelerating, or moving negative? The part of the world where I feel the most confident about growth today is Asia. The second prism I look at is where is momentum positive? You know, "the trend is your friend." You want to be in markets that have positive momentum. And, today, where the momentum is positive is basically the U.S. and Asia. These are the two parts of the world where you have the wind in your sails. The third thing you want to look at is excess liquidity..."
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