Political and economic power brokers gather in Davos, Switzerland, this week to chew on the pressing issues facing the global economy, such as immigration, inequality, climate change and, of course, what to expect from the Trump Train.
But an early reading from five-year Davos veteran Scott Minerd of Guggenheim Partners reveals an undeniable optimism amid the snow drifts about the prospects for growth, and a belief that this bull market still has plenty of room to run.
Minerd, who serves as chief investment officer for the firm and its $295 billion under management, says to listen closely, and then entertain the opposite.
“I am starting to consider that Davos may be a valuable contra-indicator,” he wrote in a post. “I have seen bull market tsunamis before. They can be both rewarding and destructive. The key is to know when to get out.”
And, if past history is any indication, Davos could be serving up that “get out” moment, Minerd explained. “While I am hesitant to jump to a conclusion,” he says, “I am troubled by the euphoria undergirding the gathering here.”
He’s seen this contrarian signal flash before. He said the emergence of Africa onto the global scene was the buzz a few years back, but, while the long-term case might be intact, Minerd said it turned out to be a much more profitable short-selling play.
Then, just two years ago, the experts were warning that the global economy was on the brink of a recession. Stocks were selling off oil had collapsed toward $25 a barrel, and the pundits were calling for a new bear market. Look where we are now.
“The consensus at Davos led me to conform by allowing for further price erosion when I should have pounded the table that it was time to buy,” Minerd said.
This year, he clearly won’t be getting swept up in the wave of bullishness.
“It feels like the discussion will focus on ‘How high is up?’” he said. “This is occurring in the face of U.S. tariffs on solar panels and washing machines, while CNN and the BBC run documentaries on a rising tide of nationalism, and against a backdrop of discussions on restricting immigration just when healthy Western economies are starting to experience labor shortages in certain key industries.”
Well, it hasn’t been much of a contrarian signal so far. The Dow DJIA, -0.01% closed just fractionally lower, while both the S&P 500 SPX, +0.22% and Nasdaq COMP, +0.71% logged gains during day one of Davos.