This article is part of a regular series of thought leadership pieces from some of the more influential ETF strategists in the money management industry. Today's article is by Scott Kubie, CFA, chief strategist of Omaha, Nebraska-based CLS Investments.
Donald Trump’s narrow presidential victory, Brexit and stronger nationalist tendencies in Europe and Asia indicate an underlying shift in the emphasis of consumers and government policy.
While it may continue to cause some volatility, the shift will benefit economic growth through a few key changes in behavior:
- Greater consumer optimism fuels increased consumption
- Expansionary fiscal policies support infrastructure projects
- Regulatory reform increases potential business investment
Economic trends show this transition is already in motion. Research originally conducted by MSCI and updated by CLS separates economic regimes into the four different quadrants seen in the chart below. This chart shows the global economy has moved from the slow-growth quadrant to the heating-up quadrant. The heating-up quadrant is associated with stronger economic growth and increasing inflation.
For a larger view, please click on the image above.
This shift will create opportunities for the patient investor in the coming years. There will be numerous ways to tilt portfolios toward these themes. This article briefly summarizes three opportunities CLS sees in the current environment.