Looking at the financial markets, such as stocks, bonds, and precious metals (gold, gold coins), which type of investment is most suitable? Or is it safer to keep idle money in the bank? With a plethora of financial experts giving advice, which information can be trusted the most? To find answers, a reporter interviewed Mr. Rex Chou, a diversified investment advisor in the San Francisco Bay Area.
Mr. Chou stated, “On April 25th, the Bureau of Economic Analysis under the U.S. Department of Commerce (bea.gov) announced that the U.S. GDP (Gross Domestic Product) for the first quarter of 2024 grew by 1.6%, the lowest level in nearly two years, significantly below market expectations.”
He elaborated, “According to the data from the Department of Commerce, the GDP growth for this quarter at 1.6% is lower than the 3.4% in the fourth quarter of 2023. This 1.6% Real GDP is the figure after subtracting the 3.1% inflation. Due to the first-quarter inflation rising from 1.6% to 3.1%.”
Analyzing further, Mr. Chou explained, “Although Real GDP grew by 1.6%, the U.S. economy is doing fairly well, with actual economic growth reaching 4.8%. One of the main reasons is the decent employment rate, with an unemployment rate of 3.8%, historically low. When people are employed, consumer spending performs well. 70% of the U.S. economic growth is supported by domestic consumption, so when domestic consumption is strong, GDP experiences good growth.”
In the current economic scenario, as described by Mr. Chou, the Federal Reserve is in a period of temporarily halting interest rate hikes but not yet lowering rates. As long as the U.S. economy avoids falling into recession, the stock market will not experience a significant downturn; moderate market corrections are deemed healthy.
Regarding the stock market performance, Mr. Chou mentioned, “Since November last year, the stock market had been rising until the end of March this year. In April, a pullback started to surface, meaning a temporary decline after a prolonged increase or a minor price adjustment. This period reflects two factors – economic slowdown and the avoidance of recession.”
Emphasizing further, Mr. Chou noted, “When calculating stock market returns, one crucial concept to consider is the Price-to-Earnings Ratio (PE ratio), indicating the price divided by earnings. A higher PE ratio signifies high stock prices, while a lower PE ratio indicates undervaluation or lack of optimism from the market about the company’s prospects.”
Mr. Chou highlighted, “After a period of consolidation, earnings are essential support for the PE ratio. The first-quarter financial reports of many companies are expected to be released in the coming weeks. If these reports outperform expectations, the stock market is projected to rebound after the pullback.”
Additionally, market rebounds are not solely dependent on the PE ratio but also on various factors such as the economic environment, company performance, and market sentiment, according to financial market principles.
Regarding the influence of presidential elections on the stock market, Mr. Chou pointed out, “Looking at historical trends, although not guaranteed, there is a significant probability of 80% that presidential elections impact the market. Observing the stock market three months prior to elections, if the incumbent party wins, the market tends to rise during those three months; conversely, if the opposing party wins, there is a downturn.”
Mr. Chou highlighted a notable exception, “An anomaly occurred during the term of former President Trump. Despite the market rising in the three months before he left office, the Democratic Party ultimately won. While there may be other unique factors at play, the market performance four years ago was an exception, showing the rule is not 100% accurate but possesses an 80% level of accuracy.”
Special Disclaimer: This article reflects the interviewee’s viewpoint and not that of the publisher. For specific investment advice or professional knowledge queries, please refer to the contact information provided below.
Introduction:
Mr. Rex Chou is the founder of New Assets Investment Advisors LLC, with over 20 years of investment and financial services experience. He has served as an investment advisor and senior executive in business development departments at prominent firms such as Fidelity Investments, HSBC Asset Management, and Schroders in Taiwan.
From 2008 to 2012, Mr. Chou was the General Manager of Deutsche Far Eastern Investment Trust, a joint venture between Deutsche Bank and Far East International Commercial Bank. In 2013, he established New Assets Investment Advisors LLC in the United States.
Mr. Chou holds an MBA from Drexel University and is a registered investment advisor with licensing.
New Assets Investment Advisors LLC
Website: https://www.new-assets.com/
Contact Number: 408-520-9558, Mr. Rex Chou, offers 30 minutes of free consultation.
Company Address: 1525 McCarthy Blvd., Suite 1083, Milpitas, CA 95035.