The Outlook for China
Last year’s market moves were often driven by headlines relating to the China trade deal, while this year so far is all about the coronavirus. On last week’s episode of “Behind the Markets” with investment strategist Andy Rothman of Matthews Asia, we had a great discussion reflecting on both these current issues as well as the long-term view on China.
Rothman has been watching the coronavirus data very carefully. Of the 75,000 global cases, 98% have been found in mainland China, and 82% in the Hubei province where it began. Hong Kong and Singapore both have fewer than 100 cases, while the U.S. only has 16 cases so far. Rothman is hopeful that the virus will be under control by the end of March. China has implemented strict lockdown procedures, so as it starts to lift the lockdown and gets back to work outside of Hubei province, we will have to monitor how quickly it spreads. The more people congregate in close areas, the faster it spreads.
China Trade Deal
President Trump is cutting China some slack on how quickly it increases its purchases of U.S. goods. Rothman sees the relative recent stability of the Chinese currency (in the past it would have weakened with the coronavirus) as a sign that China is appeasing Trump while new agricultural purchases are delayed with port closures.
China Still World’s Best Consumer Story
Last year was the eighth consecutive year the consumer and services segment of the Chinese economy was larger than its manufacturing and construction segments. While Chinese income will slow down in the short term, Rothman remains bullish on the long-term growth opportunity provided by Chinese consumers.
Rothman’s big picture view that he hopes our leaders recognize is a unique perspective. He does not see China as the Soviet Union of the Cold War, meaning he does not believe China wants to crush the U.S., but rather outcompete us as an economic superpower. He hopes Washington politicians see this in future rounds of negotiations as we try to adjust to new global trade norms.
This was a great conversation with Andy Rothman. Please listen to the conversation below.
Jeremy Schwartz has served as our Global Chief Investment Officer since November 2021 and leads WisdomTree’s investment strategy team in the construction of WisdomTree’s equity Indexes, quantitative active strategies and multi-asset Model Portfolios. Jeremy joined WisdomTree in May 2005 as a Senior Analyst, adding Deputy Director of Research to his responsibilities in February 2007. He served as Director of Research from October 2008 to October 2018 and as Global Head of Research from November 2018 to November 2021. Before joining WisdomTree, he was a head research assistant for Professor Jeremy Siegel and, in 2022, became his co-author on the sixth edition of the book Stocks for the Long Run. Jeremy is also co-author of the Financial Analysts Journal paper “What Happened to the Original Stocks in the S&P 500?” He received his B.S. in economics from The Wharton School of the University of Pennsylvania and hosts the Wharton Business Radio program Behind the Markets on SiriusXM 132. Jeremy is a member of the CFA Society of Philadelphia.