By: Garrett D’Alessandro, CFA, CAIA, AIF®
Chief Executive Officer & Chief Investment Officer, City National Rochdale
Some opinion polls show that by a margin of almost four to one, the public considers the nation to be on the “wrong track.” Although these polls present our leaders with insight, we believe that, despite the current challenges there are good reasons to have faith in America’s future.
Previous generations of Americans have endured more difficult social and economic challenges, confronted significant threats to our national security, experienced various social divisions, incurred larger debts, competed against tough foreign competitors, and faced significant policy uncertainty. The U.S. has always risen to the challenge, and we believe this will be the case again.
The U.S. economy remains the largest and most productive in the world, with its unparalleled pace of innovation, large skilled labor pool, and rich tradition of economic opportunity, which continues to attract the best and brightest from around the globe. Recent studies rank America first on indices of entrepreneurship, first in total research and development, first in university rankings, and third on the World Economic Forum’s list of most competitive economies.
What’s more, contrary to popular media reports, the U.S. is still in the business of producing valuable goods. America continues to be a global leader in select high-end manufacturing, with output second only to China. While it is correct that the number of American manufacturing workers has been in decline for decades, the value of what we manufacture and export in one month is greater than what most countries export in a year. However, services, not goods, are the dominant aspect of the U.S. economy today and will remain so into the future. Over the long-term, the U.S. is appropriately focused on achieving global growth from U.S. multi-national companies, whether it comes from goods or services. More than half of the world's top 100 brands are American, including eight of the top ten, giving corporate America an unequaled global footprint relative to its international competitors.
On top of that, in just over a decade, the country has managed to transform itself into an energy powerhouse, rising to the number one global producer of oil and natural gas. The boon generated from this development is not only lowering energy costs for consumers and businesses, but it is also helping to raise revenue for the government, reduce our trade deficit, and spur direct-investment inflows from abroad. By 2040, GDP estimates from increased productivity, labor, and capital are 0.5% higher than they would have been in the absence of shale development. That’s an enormous investment infusion.
None of this has been lost on foreign investors. The dollar remains the reserve currency of choice for many nations, accounting for roughly 65% of global central bank reserves last year, with the euro ranked a distant second at 25%. However, the reason the U.S. remains so special is not just because of its size, resilience, and the potential of its economy, but also because of the sturdiness of its public institutions, financial system, and legal framework (which, despite their flaws, still set the standard for the world).
Indeed, America remains the top destination for foreign investors. Over the past seven years, foreign investments flowing into the U.S. have totaled nearly $1.5 trillion, or about 20% of the global total, and more than half as large as China's. These inflows should further continue to support real growth, employment, and asset prices.
Successful investing is about the future. While we give serious consideration to risks in each of our investment strategies, and understand investors’ concerns about the sturdiness of the economic expansion underpinning this bull market, we don’t share the long-term view that opinion polls might indicate. We believe the foundational drivers of the U.S. economy (including our innovative and creative capabilities, our superior research and development, and our outstanding institutions of higher education) will continue to make the U.S. the most favorable country in which a person can live, invest, and create economic success.
The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice.
Certain statements contained herein may constitute projections, forecasts, and other forward-looking statements. Certain information has been provided by third-party sources and, although believed to be reliable, it has not been independently verified and its accuracy or completeness cannot be guaranteed.
Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as on the date of this document and are subject to change.
All investing is subject to risk, including the possible loss of the money you invest. When interest rates rise, bond prices fall.
Past performance is no guarantee of future performance.
This material is available to advisory and sub-advised clients of City National Rochdale, LLC, a Registered Investment Advisor and a wholly owned subsidiary of City National Bank.