{"id":4290,"date":"2021-10-26T09:10:00","date_gmt":"2021-10-26T07:10:00","guid":{"rendered":"https:\/\/swisschange.ch\/2021\/10\/26\/required-homework\/"},"modified":"2021-10-26T10:28:11","modified_gmt":"2021-10-26T08:28:11","slug":"required-homework","status":"publish","type":"post","link":"https:\/\/swisschange.ch\/en\/2021\/10\/26\/required-homework\/","title":{"rendered":"Required Homework"},"content":{"rendered":"\n

EMR October 2021<\/p>\n\n

Great Upheavals Create Major Investment Opportunities<\/h2>\n\n

Dear Reader<\/p>\n\n

The investment outlook is rather bleak, driven mostly \u2013 but not solely – by lagging productivity, fears of rising inflation, and high and rising governmental indebtedness, as well \u201cunwarranted\u201d fears of an impending equity market correction.<\/p>\n\n

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What does the chart on long-term indexed equity indices suggest? \nPoorest performance = NIKKEI \nMediocre performance = UKX and CAC \nand \nBest performance = SPI, DAX & DJIA. \nDoes the chart imply something about productivity and\/or on something else? \n<\/figcaption><\/figure>\n

Why the Focus on Productivity?<\/h2>\n\n

Over the years, we have learned that the best-performing companies (represented here by the respective stock index) in some sense can be quantified by the interaction of productivity, inflation growth and currency performance. Recently, however, productivity gains have been increasingly hampered by governments’ deficit spending. It is a fact that in the past those sectors of the economy that have been able to improve their productivity while providing \u201cnew\u201d equipment (through innovation and technological progress) have experienced a significant boom and have prospered significantly. What role have currencies played is an interesting question. In this sense, we are not surprised that the SPI, the DJIA and the DAX perform so differently compared to the NIKKEI, the UKX and the CAC index. We do assume that equity markets are not an inflation hedging instrument but a play-ground for currency specialists! It can be deduced from the chart on real GDP that the problems dominating the current technological progress point to a difficult identification exercise of the companies and industries with the highest potential capabilities to solve the productivity problems, inflation expectations and currency reactions. We thus continue to focus on the innovative spirit of each company and\/or sector of the economy. The focus must thus be on the power to innovate, to counterbalance the power to tax = the power to destroy.<\/p>\n\n

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The available real GDP data for the five industrialized nations clearly show us that there has never been a similar correction since the early 1980s, with the exception of the period from 2008 to early 2010!<\/p>\n\n

The chart shows that the Swiss economic activity reacted with a \u201csubstantial\u201d lag to the downward revisions of real GDP in the USA, Germany and the UK. The development in Japan is much more pronounced for the recession period 2007-2010.<\/p>\n\n