Looking beyond the United States, we confront a very large question in China: Can it sustain its rapid pace of growth? In an effort to rein in the shadow-banking sector, Chinese authorities have slowed money-supply growth. Arguably, China’s banking sector is too big relative to world money supply to simply return to its historical rates of asset growth.
Looking forward, there are, as always, plenty of risks about which to be concerned. Many of the Fund’s stocks have suffered from a view that margins have reached a secular peak and that earnings will fall. The combination of this “as good as it gets” perception with fears about global GDP growth, the impact of trade disputes, rising US interest rates, and a strong dollar has resulted in reduced multiples across the Fund.
In the third quarter of 2018, the fixed income market improved to some extent from investment-grade bonds down through leveraged loans, but duration-sensitive names and sectors generally continued to be punished—damage that may accelerate with further potential increases in Treasury yields.
Matt McLennan reflects on his first decade managing First Eagle's Global Value team, and the challenges and potential rewards of value investing. See what excites him about the next 10 years.
We live in interesting times. Over the past decade, we have witnessed the global financial system on the precipice of collapse, monetary interventions that are unprecedented in modern times, the European community on the brink of disintegration, and populist uprisings that would have been unimaginable as recently as five years ago.