There are several areas of analysis that have stirred debate at JCP as we head into 2019, and each appears to carry a bit more bite than in standard years. These include the following topics, which we discuss in full, with stock examples, in our 2019 market outlook attached.
Technology, innovation and creative destruction
We continue to see a fantastic level of innovation and technological change. A 2019 outlook statement gives us an opportunity to take stock of the slower processes of innovation and change that dominates our day-to-day analysis of stocks over the course of a year.
Great companies are constantly innovating, and a rare few both innovate and increase their ROIC in doing so. Not all innovation needs to change the world to create significant value for listed companies.
The economic consequences of falling Australian household wealth and the impact of the Australian Royal Commission
What impact will falling credit growth have on house prices, the household savings rate, and consequently household consumption, economic growth and employment?
What’s the chance that Australia experiences an adverse credit cycle and a banking crisis?
What will the recommendations of the Royal Commission mean for bank profitability due to lower credit growth, higher regulatory costs, and changes to bank behaviour when dealing with customers?
The removal of global monetary stimulus
We consider the removal of global monetary stimulus and the implications for markets. Across the US Fed reducing its balance sheet and raising rates, through to Europe and indirectly in China, global money growth is retreating in an environment of weak inflation and high asset prices.
Will liquidity and fiat stimulus retreat, what growth model could replace it? For whom would this make sense? Or does the sheer quantum of debt mean the opportunity to “normalise” proves ephemeral? 2019 will provide some clues.
China’s economic challenges
How does China juggle a weakening economy, debt reduction, economic reforms, and an escalating trade war with the US; while avoiding a major collapse of asset values which generates an adverse credit and business cycle (i.e., a Minsky moment)?
Click below to read our full analysis in the JCP Investment Partners 2019 market outlook report below.