Jeffrey Kleintop, Charles Schwab’s chief investment strategist, told Business Insider that if there is a bitcoin bubble, it is not like the dot-com and housing bubbles. If bitcoin prices fall, it will not be for the same reasons as the other bubbles since bitcoin is not yet embedded in the economy and the financial structure the way dot-com and housing stocks were. Any fallout in bitcoin prices would be reflective of developments unique to bitcoin.
Kleintop, whose company manages $320 billion in assets, said he gets asked whether or not bitcoin is a bubble every place he travels throughout the world.
Kleintop is one of several experts who has differed with those who have called bitcoin a bubble waiting to burst.
Goldman Sachs CEO Lloyd Blankfein recently told Bloomberg he wasn’t willing to “pooh pooh” the cryptocurrency, despite having a certain “level of discomfort with it” as is the case with anything new.
Morgan Stanley CEO James Gorman also recently stated that bitcoin is “more than just a fad” that “isn’t inherently bad.”
Da Hong Fei, founder of NEO, the 12th largest cryptocurrency with a market capitalization of $160.852 million, has said that even if bitcoin is a bubble that eventually bursts, the cryptocurrency will recover and even become bigger.
Kleintop said 2018 will be a strong year for equity valuations, and the first year for back-to-back, broad economic growth in more than 10 years. The top 45 economies all are expected to grow next year, pointing to further earnings growth.
In 2017, earnings increased every month as stocks rose, he said.
Yield curves are flattening slightly, Kleintop said, which is one area of concern for 2018. The yield curve could portend a recession in 2019 or thereafter.
There are risks to watch out for in 2018, he said. There is a possible slowing of China’s economic growth, which would impact the entire world.
Geopolitics and natural disasters are always a concern, he said. Any slowdown in economic growth in 2018 could be adversely affected by politics or natural disasters.
Kleintop is not concerned about any action by the Federal Reserve that would lead to inflation. He said inflation is beginning to rise, meaning the personalities at central banks are less important. He said the Fed will likely announce two or three rate hikes in 2018. This will not be a big risk since the market is prepared for these hikes.
Kleintop encourages investors to think globally in 2018. Global stocks have outperformed the U.S. market in the last year or two. Global stocks are more cyclical and more inflation sensitive. In addition, the valuations are more attractive.
It is important for investors to diversify, he said. Investors typically look for a certain country or sector to do well, but for the first time in 20 years, there are lower correlations between how different markets behave in relation to each other. This points to the best benefit from diversification in 20 years.
Kleintop said the tech sector outlook is strong, driven by business spending in this area. He said more business spending on technology could witness more earnings momentum in 2018.
Kleintop said tax reform is happening worldwide, as countries cut corporate taxes. Besides the recent activity on this front in the U.S., France has proposed corporate tax cuts for 2018, Japan has already enacted some, and the issue is under discussion in Germany.
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