Why World’s Largest Investors May Cause a Market Melt-Up

03/15/18 02:32PM EDT


Q: What do China’s Xi Jinping, Brexit and Donald Trump all have in common?

A: They embody the current geopolitical battle between “centralization” and “decentralization” … a key global development which may significantly impact investors’ future returns, according to Dr. Pippa Malmgren.

Malmgren—the influential economist, best-selling author and former White House economic advisor is our special guest in this new Real Conversations webcast with Hedgeye CEO Keith McCullough.

CLICK HERE to watch the full 27-minute interview

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Below is a brief transcript from their conversation.

Keith McCullough: All institutional investors want to talk about is the downside these days. They want to talk about the biggest risks. People rarely want to talk about the upside. What are your thoughts on that?

Pippa Malmgren: Well, I’ve been bullish on stocks now for the past five years and I remain so for many reasons. One of the reasons is that we have $20 trillion in the economy that we didn’t have before the crisis happened.

We know the central banks are going to raise interest rates a couple times, maybe even four times this year. That’s nothing. It’s like taking a cup of water out of the Atlantic Ocean. It’s not a tightening.

So when I talk to the biggest institutional investors in the world, they’re saying: ‘I’m in stocks and not overweight because it’s bad luck to be buying stocks at the top. So every day I hope and I pray that the market falls -10%, but it never happens. So I have to buy every pullback.’

They’re in bonds and have cash. The problem with bonds and cash is inflation is back. I’m not saying it’s wild inflation, but even a little bit of inflation is a huge issue for an investor. Everywhere inflation is now burning at your rear-end and you’ve got to get out of cash and into something hard, like equities, private equity, building or financing of a business, or hard assets like property.

So what I see is big institutional investors that have been sitting on the sidelines. Now they’re saying, ‘I need to get out of cash and into something real.’ All of this makes equities go up, not down.

CLICK HERE to watch the entire 27-minute interview

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