– Jarod Kintz.
In a crisis, it helps to have good counsel. Investment strategist Mike Tyson is pretty good at summing up the problem:
“Everyone has a plan ‘til they get punched in the mouth.”
Or as the military strategist Helmuth von Moltke the Elder put it, somewhat more formally:
“No battle plan ever survives contact with the enemy.”
The enemy has been quick to show himself this year, in the form of a bear market, at least for stocks. This bear has so far been quick, and indiscriminate: the US; Europe; China; stock markets have fallen sharply, internationally. Investors, being human, have scrabbled in search of an explanatory narrative.
Some have blamed the Fed’s baby steps towards normalising interest rates (if a rise from 0% to 0.25% can cause this much investor concern, get a load of history). Some blame the collapse in the oil price. Last week we watched David Cronenberg’s 2012 thriller ‘Cosmopolis’, which has Robert Pattinson playing a 28-year-old hedge fund billionaire driving around town and losing his entire fortune in a single day due to the unexpected rise of the yuan. Other than getting the direction of the renminbi wrong, it could have been shot yesterday. (The film, like the financial markets of 2016, is largely unfathomable.)
But as CLSA’s Christopher Wood points out, perceptions of emerging markets, including China’s, are becoming increasingly divorced from reality. The oil collapse, for one, is a huge red herring. Asia in aggregate
“is a massive beneficiary of lower oil prices.. [and] Asia now represents 72% of the MSCI Global Emerging Markets Index.”
So the narrative on oil is probably wrong, at least as regards most Asian economies, including Japan’s.
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