Recap & Outlook: Global Economy

Michael Rudd, CFA | President, CEO and Portfolio Manager

We have recently written about the US, China and European economies, which as a group, account for 65% of global gross domestic product. While there is weakness in some areas, we believe the current environment remains generally constructive. We wrote at the end of last year when stock markets were in turmoil that “Irrespective of the headline news from the financial press, we believe that the data that we regularly follow does not show any indication of a coming recession. Indeed, employment remains robust, inflation is under control, annualized GDP growth is strong and the companies that we follow have expanding revenue.” PIO Volume 8, Edition 25. We continue to believe this to be true.

  • Employment continues to be strong and inflation remains low. We believe that if these two elements remain constructive, central banks around the world will remain accommodative to expanding economies. Other than a surprise crisis, we do not believe that there is reason to be concerned over the short-term. The volatility at the end of last year and the quick recovery into the first quarter of this year make the point: that central banks, all things equal, will assist with economic recovery when they can.
  • We present employment data in Figure 1 and inflation data in Figure 2. The grey bars in each chart represent recession periods in the US. For the most part, over the very long-term, inflation and unemployment peak during a recession. These are not the only two reasons that economies fall into recessions. Financial distress events like the Great Financial Crisis of 2008, Long Term Capital and Asia Contagion of 1998, for example, caused recessions which led to supportive policy reaction from central banks around the world.


“This means that” we continue to find opportunities to adjust our portfolio positions. We do not believe that we will enter a global recession in the near term and remain focused on the fundamental operations of our businesses. Data can change quickly. We continue to remain focused on our investment thesis and watching for change.

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*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Partners’ Real Return Plus Fund are presented based on the masters series of each fund. The Pathfinder Core: Equity Portfolio and The Pathfinder Core: High Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder North American: Equity Portfolio (January 2011), Pathfinder North American: High Income Portfolio (October 2012) Pathfinder Partners’ Fund (April 2011), Pathfinder Real Return Plus Fund (April, 2013), Pathfinder International Fund (November 2014) and Pathfinder Resource Fund (May 2018).

Pathfinder Asset Management Limited (PAML) and its affiliates may collectively beneficially own in excess of 10% of one or more classes of the issued and outstanding equity securities mentioned in this newsletter. This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor PAML can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your portfolio manager, who can assess all relevant particulars of any proposed investment or transaction. PAML and the author accept no liability of any kind whatsoever or any damages or losses incurred by you as a result of reliance upon or use of this publication.