Gerard Minack, founder of Minack Advisors, joins DoubleLine Deputy Chief Investment Officer Jeffrey Sherman and Portfolio Manager Samuel Lau to discuss his global macroeconomic outlook and asset allocations. With U.S. stocks at or near record valuations, Mr. Minack also observes “so much good news is in the price. The consensus is so tightly clustered.” Even after stripping out the FAANGs and Microsoft, he regards U.S. stocks as expensive. These are among the factors behind his outlook for U.S. equities to underperform other equity markets.
Developed economies are on the cusp of reflation, which among other influences would serve as a further “carrot” to attract capital into non-U.S. stock markets. Mr. Minack describes a world shifting from “three decades of monetary-policy dominance to a new era of fiscal-policy dominance,” with “large, sustained fiscal deficits where central banks are playing a backstopping, supportive role” by monetizing most of those deficits. The catalyst for this sea change is the COVID-19 pandemic.
Broadly speaking, with respect to equities, Mr. Minack favors cyclical companies with operational leverage, especially in Japan, Europe and emerging markets. Among his industry themes, he likes the “beat-up goods producers,” including “conventional car makers” (not necessarily Tesla), construction companies and miners. “They’re all very cyclical, and the cycle looks very strong.” He also believes the commodity take-off of the last nine months has more room to run.
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