Donald Trump had a great time at Davos, where he went to have a little gloat. He told delegates his "brand new America" has now recovered from years of dismal "stagnation". The US is "open for business", which he reckons is reflected in the booming stockmarket the Dow Jones is up more than 40% since his election. He pointed to the lowest unemployment since records began, genuinely good growth rates, and the successes his deregulation and tax reform plans are enjoying.
Several firms have already announced cash repatriation and domestic investment plans. We accept that trickle-down doesn't always work in the way promised, but this round is getting off to a good start. Disney is handing out one-off $1,000 bonuses, Chrysler $2,000, and Apple is giving most employees stock grants of $2,500 to show its own confidence in Trump's America. You can argue the growth comes at the expense of decency, or that it was all set in motion not by Trump but by the Federal Reserve. However, you can't deny that, in economic terms, things are looking up, and not just in the US. Every major economy is growing, says The New York Times, creating "a positive feedback loop". Greater business confidence means more hiring, which puts more money in consumers' pockets and gives businesses reason to expand again. Win win.
There are, of course, huge risks. Some are political (in this week's magazine, I note how well things are going in Japan, but a little North Korean escalation and all bets will be off). Some are social (wages need to rise faster to head off the endless rows about inequality). Some are economic. John Stepek looks at how rising bond yields could scupper any exuberance, and our briefing, along with the fates of Carillion and now Capita (whose share price fell 40% this week on a nasty profit warning) are a reminder that too many firms still have far too much debt at time when the price of debt is rising. You don't want to hold those companies.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
So what do you want to hold? If you have faith in Trump's America, consider the Arbrook American Equities Fund. You can still buy in at a low management fee for founding investors (0.45%), and manager Robin Milway reckons that, given the wave of digitalisation and the tax-cut programme, there are still hordes of firms with mispriced potential in America. Not everyone will agree, but Milway has a good long-term record. Otherwise Japan is one of the lower-risk markets in the world, Andrew Van Sickle likes Vietnam, and David Stevenson reckons income investors should look at oil bonds. But however you invest, keep some cash on hand as John notes, with bonds at a 35-year turning point, there is more risk in the global financial system than usual.
-
Pension vs property: which option provides the best income for your retirement?News With the cost of a comfortable retirement on the rise, future retirees need to weigh up which strategy offers the best returns. But is a pension a better bet than property?
-
The industry at the heart of global technologyThe semiconductor industry powers key trends such as artificial intelligence, says Rupert Hargreaves
-
Beat the cost of living crisis – go on holidayEditor's letter As inflation rages, energy bills soar and the pound tanks, what’s a good way to save money this winter? Go on holiday, says Merryn Somerset Webb.
-
How capitalism has been undermined by poor governanceEditor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
-
Don't be scared by economic forecastingEditor's letter The Bank of England warned last week the UK will tip into recession this year. But predictions about stockmarkets, earnings or macroeconomic trends can be safely ignored, says Andrew Van Sickle.
-
The biggest change in the last 17 years – the death of the “Greenspan put”Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
-
The wolf returns to the eurozone’s doorEditor's letter The eurozone’s intrinsic flaws have been exposed again as investors’ fears about Italy’s ability to pay its debt sends bond yields soaring.
-
Things won't just return to normal – that's not how inflation worksEditor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
-
Car hire and the strangeness of the post-pandemic economyEditor's letter A global shortage of hire cars and unusually high hotel occupancy rates sum up the post-pandemic global economy in a nutshell, says Merryn Somerset Webb, with enhanced demand meeting restricted supply.
-
Why we need to get a grip on our governmentEditor's letter Our government is trying to do too much, enacting policies that are destructive to the private sector. It needs to drop the the feel-good nonsense and create policies that lead to long-term wealth, says Merryn Somerset Webb.
