Editor’s note: Below is an interview with David Kotok, founder and CIO of Cumberland Advisors. This Q&A went out to subscribers of our “10 Things You Need To Know Before The Opening Bell” newsletter on Wednesday morning. Sign up here to get the newsletter and more of these interviews in your inbox every day.
BUSINESS INSIDER: Assuming things die down in Ukraine, what macro events is Cumberland watching closely?
David Kotok: There are plenty of geopolitical hotspots. Not just Ukraine. Nigeria and the ongoing Islamic militant killing of Christians in the half the country threatens the other half and the oil producing section. Middle East and Persian Gulf we know. Venezuela is known. There is not lack of trouble spots.
BI: What is Cumberland’s view of the state of labour markets and inflation?
DK: Labour market recovering slowly in US and that is likely to gradually improve but will take a long time to restore to normal, whatever normal means. There are about 20 million American households with under employment or unemployment characteristics and they suffer from lower labour income. This is not an easy issue to fix. It needs a lot of time.
BI: Do investors have much to worry about out of China?
DK: Yes. China slowing is a big issue and China credit system and the taking of credit losses is a new experience in this realm. On the other hand a pickup in India growth rate can offset a slowing of china growth rate. Mixed picture.
BI: What is the most underreported macro story around?
DK: Productivity gains from the acceleration of the rollout of the tech sector do not get enough attention. They continue unabated and are or may be accelerating. That means inflation is kept low from productivity gains and from low pressure coming from labour. That also means the case for low interest rates for a longer time than markets expect is intact. Every one fears higher rates. We may get some rise in rates but we may not get the spiking of rates that folks fear. Meanwhile the federal deficit is shrinking and that will continue for several more years.