“We have left the world of free markets and entered the world of managed economies,” wealth manager Felix Zulauf tells US financial newspaper Barron’s. Central banks took over economic policy after the financial crisis, and “run the show to this day”. It’s just one of many “tectonic shifts” that the investment veteran has witnessed over his long career in markets.
Another shift is that “the globalisation movie is running backwards… which could create problems for multinational companies”. US president Donald Trump has been elected to tackle China’s unfair trade practices – which have seen middle-class incomes in the US and Europe remain static, even as corresponding incomes in emerging markets have soared.
However, while China may lose a few trade battles, it will “eventually win the war” by building trade alliances with other powers across the globe, including Europe, over “the next six or seven years”. Zulauf also expects China to devalue its currency by 15%-20% in the relatively near future, as it aims to revive its slowing economy and counter the effects of tariffs.
Zulauf remains bullish on oil prices, “because the market is tight”, with demand solid and supply from Iran and Venezuela in decline. “One morning, we’ll wake up and crude will be at $95 or $100 a barrel.” That’s good news for US shale oil producers and for the companies that provide them with equipment and services. He tips the SPDR S&P Oil & Gas Exploration & Production (NYSE: XOP) exchange-traded fund as one way to get broad exposure.