January 16, 2020
Yesterday at the U.S./China trade signing event, Trump went around the room and named leaders from about 20 publicly traded companies.
Let’s take a look at the list, and how they’ve performed (today, year-to-date and since the start of 2018)…
You’ll notice half of the group was either a financial or industrial conglomerate.
Clearly they like the prospect of seeing the opening up of China (giving international business access to its 1.3 billion population) and the opportunity to own full control of a business in China. But they are also simply interested in a more stable geopolitical environment, and therefore a better economy (and one with more visability from which to plan and execute).
On the note of “opening up China,” Lui mentioned in his speech that China’s per capita GDP is now exceeding 10,000 U.S. dollars. Aside from the sheer size of the Chinese population, that per capita GDP makes for a very valuable consumer.
Why? Historically, every major developed world economy hit a point of per-capita GDP that triggered an exponential rise in the consumption of commodities. When you hit a certain level of per capita wealth you get the kind of improvements in quality of life that begin to drive demand for things like electricity, air conditioning, cars, etc.
With this in mind, remember this chart of commodities we’ve been looking at here in my Pro Perspectives notes …
And remember, compared to the S&P 500 (the commodities index/S&P 500 ratio) commodities have never been cheaper.