Tim Armour, leader of The Capital Group, mentioned that he believed the year: 2017—will prove interesting. Mr. Armour suggests that one theme that is certain to prove interesting is: interest rates. He mentioned the fact that the Feds increased rates, once again, for a second time.
Mr. Armour believes that the most important issue is that of corporate earnings. He stated that corporate earnings growth is going to depend on how quickly the international domestic product grows—not only within the United States, but also from an international standpoint.
He further stated that since the United States Presidential Election, it has been assumed that economic growth, on an international basis, would increase. Mr. Armour, concluded, as it pertains to the preceding thoughts, that if the aforementioned, truly occurs, the result will be that earnings will grow in proportion to growth–globally.
Tim Armour viewed the other part of the picture as being: the investor would need to pay very close attention to a huge separation with regard, to the rate of growth in the U.S., and growth located outside of the country.
He expressed, too, that Europe has had its issues: although it continues to grow. Japan, it is apparent, has had its own unique issues. Mr. Armour, stated, as far as Japan is concerned, it appears—from an economic standpoint—to be recovering—to some degree.
Regardless, of the singularity of issues, Mr. Armour offered the opinion that the globalized economy must start moving in order to positively trigger a growth in corporate earnings—a growth pattern that needs to occur.
Tim Armour, made note, that the higher interest rates were bound to effect certain companies negatively and others beneficially. He mentioned, too, due to the higher rates of interest, there will be some inflation that occurs. He said that international authorities have wished to get some inflation into the economic system. He said that if some inflation occurs—particular business enterprises; and certain kinds of companies,will thrive, accordingly. Businesses within the commodities area, or enterprises that have a great deal of price structuring power will thrive, with some inflation, introduced, into the global economic system.
Is the United States and China’s market one of the main economic venues where change is to occur? Mr. Armour suggested that there is an enormous circular pattern, going on, with regard to business enterprises that are doing exceptionally well and other businesses that are doing well after the November Presidential election.
A good example is banking institutions. Financial institutions were not faring so well, until recently. Since the time-period of the election, they have started moving. The presumption, then, is that higher rates of interest will allow banking institutions to make more money. The money will come by means of earnings produced off of the net interest margin. The bank, in other words, benefits when interest rates rise. The preceding is a bit contrary to common-sense; however, very true.
Notes Regarding Tim Armour:
Timothy D. Armour is Chairman and CEO of the Capital Group. He is Chairman and Principal Officer of the Capital Research and Management Company, Incorporated. The preceding organization is part of Capital Group. As well, Mr. Armour serves as the Chairman of the Capital Group Companies’ Management Committee. He continues in his role as an Equity Portfolio Manager, too.
Mr. Timothy D. Armour has more than three decades of investment-management experience and knowledge. His very posts, within the industry, have been, exclusively, with Capital Group which owns a $1.4 trillion investment. He was an Equity Investment Analyst, early on, within his career. His position focused upon the sectors of globalized telecommunications and United States based service organizations. Mr. Armour began his career at Capital Group by way of participating in The Associates Program. Academically, he attained a Bachelor’s Degree in Economics from Middlebury College—a private liberal arts college—located in Middlebury, VT. He currently resides in the Los Angeles area.