Investing in an Environment of Negative Bond Yields

This article by MOI Global instructor Shreekkanth Viswanathan is excerpted from a letter of SVN Capital, based near Chicago, Illinois.

Ben Graham, Warren Buffett’s guru, in his 1949 book, The Intelligent Investor, ascribed human form to the stock market and named him Mr. Market. Ben Graham went on to describe Mr. Market as a manic-depressive, swinging from bouts of optimism to moods of pessimism. While it is more than 70 years since he used a parable to describe a volatile stock market, looking at the last two years one would rightly conclude that the character of Mr. Market has not changed a bit in the intervening years! After a precipitous fall of approximately 20% in late 2018, the market recovered to put up one of the best six-month performances in 2019 since 1992.

So, what is next? While I don’t claim to have any special insights regarding the future economic performance or the stock market in general, I am more enthusiastic about the opportunity set. Sure, there are lots of things to worry about – tariffs, central bank policies, aging economic expansion, high equity prices etc. My optimistic view of the economy and market is based on many metrics that I track, but one in particular that I’d like to highlight is robust consumer demand. What do I mean?

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