On June 6, FBLI, in partnership with RMB Jacobus, was pleased to have Dick Burridge, Jr.,
founding partner, chief executive officer, and co-chief investment officer of RMB Capital give
an Investment Outlook presentation.
Dick began his presentation by taking a look at the state of the
global economy, which is really very positive. He explained how the world is experiencing synchronized positive growth right now with the US, UK, Eurozone and Japan economies all having healthy economies. He then went on to talk about how history has proven that leading economic indicators typically decline 8 months in advance of a recession, and that our economy is showing no signs of this, combined with the fact that consumer confidence is near historic highs.
An interesting thing Dick pointed out is that while unemployment is at an all-time low, hourly earnings for wages are not growing at the rate they probably should be. However, despite this in general, the consumer side of the economy is doing really well.
Dick said things that could slow down economy are the US budget deficit- which is growing at
an unsustainable level- and the fact that many corporate balance sheets are currently misleading.
Dick went on to speak about current market situations, talking about how the bull market we’ve
had for the last 9 years has had an amazing return rate of just shy of 400%. However, when you
compare the rate of growth between the S&P 500 and IT sector, the gap is widening, suggesting
that investors might be starting to ignore risk, which could be potentially a problem for our
economy in the future. This concern is further reinforced by the documentation indicating that of
the 108 companies that went public last year 75% of these companies have not earned a profit.
Other factors that could impact the future success of the market include the Federal Reserve
raising interest rates too high, and the ongoing trade wars (and huge trade imbalance) between
China and the US.
That being said, Dick pointed out that all earnings are still recovering nicely when you look at
the US, Japan, EM, and Europe. Lastly, while the International Valuation Gap remains wide
between the US and other countries, it is a good time to buy into high quality foreign companies.
Dick cautioned that the gap between US stock prices and earnings is starting to close, which is a
good thing. He said he feels the S&P 500 is priced right about where it should be, and he remains
optimistic about the economy for this year and next.