Salient to Investors:
Equity markets will trend higher even if economic activity continues slow for a prolonged period. Any market correction over 10% is a buying opportunity.
Asset markets are critical in the current environment and markets will not crash or collapse for the foreseeable future. The banking system has been flooded with enough liquidity to prevent another Lehman. Creating moderate to moderately high inflation is a major objective of central banks, who step in on sharp declines in equities. A 20% decline in equity markets loses $4.4 trillion of wealth for households.
If equities were impacted by economic activity to a large extent, they would not have been at a five-year high with the US economy way below its 2007 peak and the global economy in a manufacturing recession. Investors should worry less about volatile economic fluctuations and focus on quality stocks.
Global diversification is essential as over the long-term emerging market stocks will outperform developed market stocks.