INSIGHTS FROM FIRST FOUNDATION

A First Foundation Blog

The Week Ahead – The Emerging World

Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.

I recently visited Playa del Carmen in Mexico where I learned that at one time in the mid 2000’s, it held the record as the fastest growing city in the world by the Guinness Book of World Records. In 1990 it had 2,000 residents, mostly all of local Mayan decent. By the 2000’s it was growing at over 30% annually and it has slowly subsided to being just the fastest growing city in Latin America. In 2018 the population for Playa del Carmen was 252,000 and is expected to be over 300,000 by 2023. The local Mayan guides told me how the private toll road highway that we were traveling on to Chichen Itza was only one year old and how the previous roads had no shoulders, were basically dirt roads, and that back in the day the tree branches grew over the roads to form natural tunnels. Over 100 resorts have been built over the last 20 years on the Yucatan Peninsula. Many of the workers who helped build those resorts and the infrastructure to support them ended up staying to work there, bringing their families across Latin America to the area. As investors we often think about future economic growth and the potential wallets for goods and services along with all of the infrastructure that goes along with it. Now taking a look stateside, in 2018 a USA Today report showed the city of The Villages in Florida as the fastest growing city from 2010-2017, with its’ population growing from 94,279 to 125,165 (a growth rate of 32.8%). Per a United Nations study from 2016, 23% of the world’s population lived in a city with at least 1 million inhabitants and by 2030, that number is projected to increase to 27%.

Many investors have a home bias, there is a level of comfort of being familiar with the culture, the customs, and the language. Understanding the opportunities beyond our domestic boarders is critical for long-term investors. For example, the largest city (metro area) in the United States is New York City, at 8.55 million people. It’s not even the largest city in North America, that title belongs to Mexico City with over 8.9 million residents. New York City would rank #28 in the world while Mexico City world rank #23. Ranked #1? Shanghai, China with 24.1 million residents! Beijing follows at #2 with 18.6 million residents and Karachi, Pakistan rounds up the top 3 with 18 million. While protectionism has been on the rise, it’s clear that the world is continuing to grow via the emerging market economies where urbanization is continuing at a record pace as well and where the emerging middle class is clamoring for new technology and goods. 

This week investors will be monitoring the Fed once again as the FOMC closes out their June meeting with a rate decision. The market is currently pricing in a 19.2% chance of a rate cut. Our view is that the Fed will continue to hold rates steady (with a cut later this year) and once again change their language around monitoring downside risks to be more accommodative. The dot plots are likely to shift lower or at the minimum, show a hold through 2021. Investors are pulling out their playbook from 2011-2015, once again viewing good news as bad news (reasons for the Fed to not ease) and bad news as good news (more reasons for rate cuts). Looking back, we had lift-off from zero in December 2015, one rate hike in 2016, three rate hikes in 2017, and four hikes in 2018.

Data deck for June 15-June 21:

Date

Indicator

Period

June 17

Empire Manufacturing

June

June 17

NAHB Housing Market Index

June

June 17

Net Long-term TIC Flows

April

June 18

Housing Starts

May

June 18

Building Permits

May

June 19

MBA Mortgage Applications

June 14

June 19

FOMC Rate Decision

----

June 20

Initial Jobless Claims

----

June 20

Philadelphia Fed Manufacturing

June

June 20

Current Account Balance

1Q19

June 20

Leading Indicators

May

June 21

Existing Home Sales

May

    

IMPORTANT DISCLOSURE INFORMATION    

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by First Foundation Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from First Foundation Advisors. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. First Foundation Advisors is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the First Foundation Advisors’ current written disclosure statement discussing our advisory services and fees is available for review upon request. Please Note: First Foundation Advisors does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to First Foundation Advisors’ web site or incorporated herein, and takes no responsibility therefore. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Andrew Chan, CAIA, Portfolio Strategist
About the Author
Andrew Chan, CAIA, Portfolio Strategist
Mr. Chan serves on the investment team and is responsible for conducting investment manager research and portfolio construction. As a member of the investment committee, he provides market commentary and investment insights. Mr. Chan’s responsibilities include overseeing client portfolios, calculating risk metrics, conducting the rebalancing of client portfolios, and evaluating the selection of new investment managers. With over 10 years of wealth management experience, Mr. Chan has played key roles across various aspects of investment and wealth management. Prior to joining First Foundation Advisors, Mr. Chan was most recently a portfolio manager at U.S. Trust where, in addition to his daily responsibilities, he served on numerous internal committees including the investment manager committee, the portfolio model committee, and the strategic technology committee. He also served on the in-house strategic consultant committee reporting directly to the President of U.S. Trust. Mr. Chan is a graduate of the Wharton School Executive Program on Investment Management and holds a Bachelor of Arts degree in Business Administration from the University of California, Riverside. He is a Chartered Alternative Investment Analyst (CAIA). Mr. Chan serves on the executive board for CAIA Los Angeles and is the Interim President for the association. Read more
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