Schwab’s Kleintop: What do Music, Markets Have in Common?

Schwab's Kleintop matches album releases to market movements in tongue-in-cheek analysis

401k, Bruce Springsteen, music, ChinaUsing 'The Boss' to make investing points.

Jeffrey Kleintop bounded towards the stage in a high-energy, upbeat presentation at the 2017 Fi360 Conference in Nashville Monday morning that made use of Music City metaphors.

Kleintop, chief global investment strategist at Charles Schwab, told attendees to “follow the music,” matching classic rock superstar releases to market movements in a bit of tongue-in-cheek analysis about where we’re headed.

“Great rock and roll artists are also great market prognosticators,” he said. “You didn’t know that? David Bowie sang ‘Cha-cha-cha changes’ in the early 1970s, then ‘Under Pressure in the late 1970s, and ‘Let’s Dance’ in the 1980s.”

Kleintop launched into a whirlwind tour of what’s happening in the world, beginning at home by noting the United States in not in the midst of a “Trump Bump,” but something more that’s based on low volatility and solid earnings.

People are worried because of the low trade volume and low volatility, and believe it signals trouble, but it’s something on which this bull market is predicated. So, it’s actually the opposite, and low trade volume and low volatility means we’re far from market peaks.”

So if he’s not worried about potential Trump erraticism and the chaos it could cause, what is he worried about?

China, although not in a massive, re-allocation sort of way, but its volatility is “definitely something to watch in the second half of 2017.”

Swinging back to his music metaphor, Kleintop mentioned Rolling Stones’ list of the top 500 albums of all time. He noted that most occurred in the late 1960s, and trailed off in the stagnant 1970s, something that corresponded with market movements.

“When Robert Plant was signing about a ‘Stairway to Heaven’ he was talking about inflation,” Kleintop noted to laughter.

It segued into another point about music and markets, and how consumers wouldn’t sort their music collections by “risk or country,” nor should they sort their investments in that manner.

“It’s not like all American-based music sounds the same, or English, or Korean music …well …” he said, again to laughter. “Most people stick close to home, because it’s what they know. But if you only invest in Canada, are you truly diversified? Just look at the forecast for oil, and it’s a pretty good singular indication of what Canada will do.”

He closed by reiterating three points:

  1. Earnings are headed higher,
  2. China’s volatility is a near-term concern (but not too much), and
  3. Classifying investments by country and/or risk makes little sense.

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