Charts for the Beach

It's time for our annual August report, “Charts for the beach.” Each year we highlight five of our favorite charts we think consensus is currently overlooking. Don’t forget to take your mask off once settled on the beach so you don’t get strange tan lines!

China as a safe haven?

We realize well China has become a political third rail, but our job isn’t to opine on politics. Rather our job is to provide returns for our investors. Along those lines, it’s critical to understand the Chinese stock market has been a safe haven during 2020. In US dollars, the Chinese stock market has more than doubled the return of the US market so far this year.

The US stock market has done well versus other developed markets, but investors should not be myopic about investing only in the US.

China vs. US & ACWI ex US®: Year-to-Date Performance
(Total Return, USD, 12/31/2019 - 8/7/2020)

Source: Bloomberg Finance L.P. For Index descriptors, see “Index Descriptions” at end of document.

Historic money growth: does inflation lie ahead?

US M2 growth has never been faster than it is today. Current M2 growth is nearly 2/3 faster than that seen during the inflation-prone 1970s and more than double the growth since after 2008 when investors were terribly worried about inflation.

Inflation expectations have largely rebounded back to pre-pandemic expectations, but money growth is still more than double that seen in early-2020. With money growth historically strong, it seems likely that inflation expectations will continue to increase. However, the Fed’s response, should that happen, isn’t at all clear.

Inflation Expectations vs. Money Supply Growth
(8/12/2015 – 8/10/2020)

Source: Bloomberg Finance L.P.