Schwab & Co. counsels continued global investment
California bank and brokerage firm Charles Schwab & Co. recently surmised overall economic trends — both domestic and international — and their potential impact on investment decisions for Americans.
Quantitative easing (QE), wherein banks purchase bonds or assets specifically to spark activity, remained unchanged over recent weeks along with zero interest rate policy, according to the firm. Additionally, Federal Open Market Committee members concurred that the economic picture has brightened overall, even predicting that inflation could resume in the next year.
These conditions suggest that attention be paid to the variations between U.S. and overseas markets, according to Schwab’s Jeffrey Kleintop, who counsels investors to “mind the gap” as contrasting figures rise and fall, widening and narrowing the differences over time.
Given the likelihood of a wider gap in the near future, the analyst suggested that financials, housing, auto, value stocks and small-cap stocks may rank among the most promising sectors domestically; while consumer and information technology, defense, growth stocks and large-cap stocks are best bets for global markets.
In sum, while the discrepancies observed in monetary and fiscal policies may ultimately change direction, their current trend is likely to prevail in the coming year and become more significant in impact, according to Schwab.
“In general, the policy stimulus seen around the world continues to support stock markets,” Kleintop said. “Therefore, continuing to invest globally make sense, but consider emphasizing different sectors and asset classes in regions based on the different types of policy stimulus in those regions. It is important to remember that the differing policy backdrop is just one factor of global investing; there are many other factors that could magnify or mitigate its effects on investing outcomes.”
Charles Schwab & Co. is based in San Francisco.