Market thoughts: The U.S. is failing while Asia is rising
First of all, let it be known that the title is somewhat click baity – if not you won’t be reading this in the first place am I right? But basically, the points that I will be discussing in this article still stand and here’s why I am bullish towards Asia as opposed to US.
Glance at whats going on in the U.S.
Long story short [Facts] The effects of COVID-19 had managed to wiped out more jobs than the previous crisis combined. Couple that with a worsening savings rate of the bottom 90% of the US population, one can only imagine what will happen to the lives of these people who had lost their job and has no savings to tide them over this period Why does it matter [insights] It takes two hands to clap. How fast an economy can recovery depends not only on the government efforts but also the "health" of its population which forms up the economy. Which is why, in the case of US, should the recovery be one that is rapid, the government will have to literally "carry" its economy back on track which will result in further repercussions down the road. If not, it is unlikely that the US economy will experience a rapid recovery given the current financial "health" of its population. To provide an analogy, the situation is like having only one member in the team that has the capability of carrying the entire project while the rest of the member is unable to contribute. The US government will literally have to carry its country back on the route of recovery if they want this recovery to be a swift one. Regardless, this episode will without a doubt cause a dent in the state of US economy as well as their position as the global superpower.
What about Asia? How would they fair?
Long story short [Facts]
As compared to U.S., Asians generally have a culture of high savings rate. As such, Asia is in a better financial position to withstand short-term economic disruption. In addition to a better financial position, it is important to note that as a region, Asia is less dependent on our western partners in terms of international trade today as compared to 10-20 years ago.
Why does it matter [insights] In terms of the route to recovery, from a financial standpoint, I believe that Asia will be able to recover at a more sustainable rate as compared to the U.S. – note that I am using the word sustainable instead of speed.
While nobody is certain about the future, it is possible that the U.S. may recover faster than the Asia region if the government step in to literally carry its economy. However, one may question the sustainability of such a movement.
In terms of future economic developments, given the impacts of COVID-19 and a shift in the global supply chain, we will foresee a diminishing interdependence between regions, driven by higher protectionism policies as well as a shift towards increasing focus towards business operations flexibility.
Looking at the trends, Asia will stand to benefit from this as the value created in Asia will now stay in Asia as opposed to being outsourced into the other markets. Couple that with an increase in integration within Asia and the potential room for growth, this episode maybe what we need to drive and increase the growth within Asia and become less sensitive to the developments in the western regions.
Long story short
The U.S. will struggle while Asia is set to benefit from this episode. That is my view of the current climate and that is how I have always been positioning my investment portfolio – to capture Asia’s fundamental growth over a long-term duration.
So, what do you think is going to happen? Are you positioning yourself to profit from this current climate or are you blindly buying into the STI or S&P index? What do you think is the best move for you moving forward?
The world is currently at a crossroad and how the world adapts to this COVID-19 situation will change the growth trajectory of the different regions and countries completely. Choose your path carefully. Instead of doing things blindly, know the reason why you are making a certain move and how it will stack up to your future financial plans.
If you need help in areas of retirement, investment and insurance you can hit me up here.
Do remember to subscribe to the blog and follow my telegram channel for regular updates:
Daniel is a Licensed Independent Financial Consultant with MAS and a certified Associate Wealth Planner, who specializes in retirement and investments planning. Find out more here.
This article is meant to be the opinion of the author and is for information purposes only.
This article should not be seen as a financial advice
This advertisement has not been reviewed by the Monetary Authority of Singapore