If you’re looking for a place to invest your clients’ money, you don’t have to look far. The U.S. is the part of the world that will perform the best, said Pippa Malmgren, global economic policy analyst and founder of DRPM Group.
“If I had to name the part of the world economy that is the most dynamic today, that is generating the most jobs, the most innovation, it would be the Mexico/Texas/Midwest corridor of the United States,” she said, speaking at Raymond James Financial Services’ National Conference for Professional Development in Orlando on Tuesday. “I think the U.S. is absolutely hitting the ball out of the park, and the U.S. economy is the one place that major international investors are all focused on.”
Malmgren’s predictions may be quite shocking, but some of them have been correct. She predicted that Britain would vote to leave the European Union and that Donald Trump would win the 2016 presidential election.
Why the U.S.? The U.S. is where the most innovation is happening. This country, after all, has the environment and culture to build and create things. And, it's occurring in places you don’t expect.
Austin, Texas, for example, is the new Silicon Valley, Malmgren said. It is the fastest-growing job center in the world for young people. Other technology centers include Raleigh and Durham, N.C.
Another reason she’s bullish on the U.S. is that inflation is back. We’re not entering a new hyper-inflationary period, but we have gone from 1 to 2.5 percent inflation, she said.
“That is unbelievable change in the asset allocations of major institutional investors,” Malmgren added.
China is also experiencing inflation, and wages there are going up to keep pace; that country was a major source of cheap labor. It’s actually 30 percent cheaper to pay wages in Mexico than in China. When the cheapest provider starts to raise prices, it affects us all, she said.
Emerging market workers are no longer driving prices down; they’re driving prices up. That is bringing manufacturing jobs back to North America.
China’s strategy for not being a manufacturing center is to build the biggest global infrastructure links all over the world. That project is called One Belt, One Road and it's exactly what Trump has promised — to invest in U.S. infrastructure. But he doesn’t want to write the check; this is where U.S. and China interests align. Malmgren believes China will extend the deal to invest in U.S. infrastructure.
Another bullish sign? Fund managers, in a recent survey, said they’re maxing out their short positions to equities. “Call me a contrarian, but I’m like, ‘Excellent,’” she said.
“I really think it’s quite possible we’re underestimating how much innovation, change and growth is occurring in the world. We’re underestimating how much inflation is actually driving asset prices up.”