Jeffrey Kleintop on the Global Economy - Opportunities & Risks

Chris talks with Jeffrey Kleintop, CFA, Chief Global Investment Strategist & Managing Director with Charles Schwab about the state of the global economy, inflation, and the possibility of recession.

What are the potential opportunities and risks with international exposure? Opportunities include recovery from recession and risks include geo-political concerns and weather. When it comes to investing, geo-political risks are not necessarily higher today than in the past. Extreme weather could cause some disruptions at a time when the global economy is already vulnerable. Weather disruptions most significantly impact food production and transportation of goods.

What does a global recession mean for investors? Only manufacturing and trade currently seem to be in a global recession. Services (education, travel, financial, etc.) are doing ok; however, there is concern that this sector may be weaking in the 2nd half of the year and lead to layoffs.

On the good side, a slowing economic picture means that prices have come down. The CPI inflation is coming down rapidly and it will probably be the last Federal Reserve & European Central Bank rate hikes we are going to see this cycle.

In the U.S. we seem to be in a rolling recession. In 2020, we experienced a service recession; now manufacturing and consumer spending is weakening, and the service sectors are strong. When these two pieces are put together, we end up with a mild overall recession in the U.S. We are however reminded that domestic investors are not exempt from geo-political (debt ceiling issue) and weather-related (heat) concerns.

Japan is the best performing global market this year, closing on a new high in 30 years. Are we entering a period of foreign markets outpacing US markets?

Recorded July 27, 2023.