China may be following the path set by Japan in the 1990s. China's household debt has reached 62% of GDP (up from 28% a decade ago), and its corporate debt reached 160%. Japan similarly had household debt peak at 60% and corporate debt peak at 145%. 1
In this elevated interest rate environment, the S&P 500’s high-dividend stocks are underperforming. Non-dividend paying stocks have gained 20.4% YTD, while the top 100 highest-yielding stocks are down -3.5%.* 2
The use of cash in transactions has continued to drop. Cash accounted for just 18% of payments in 2022 (down -13% from 2016), while credit-card use rose to 31% over the same period. 3
Nvidia now has the highest valuation among the 500 largest US public companies. Of the 231 companies that had similar valuations over the last 50+ years, only 20% beat the market over the following year, with a median loss of 36%. 4
The International Economy - "China Will Be The Next Japan"
The Irrelevant Investor - "Animal Spirits: How Much is Happiness Worth"
Barrons- "Visa and Mastercard Are Under Attack. They Will Do Just Fine."
The Irrelevant Investor- "Animal Spirits: Do Valuations Matter?"
*Past performance is not indicative of future performance
Client Focused Trading® for large institutions, pensions, hedge funds, wealthy families, and private equity for over 30 years.
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This desk commentary is for informational purposes only