Stock Market

Is It Time to Start Buying China Stocks?

In this podcast, Motley Fool senior analyst Bill Mann discusses:

  • How U.S. companies can be a better way to play China’s reopening.
  • The Fed chairman’s latest speech reinforced the Fed’s focus on stability.
  • Bob Iger at Disney making employees to return to offices.

Motley Fool host Alison Southwick and Motley Fool personal finance expert Robert Brokamp share tips for making this year a healthier and wealthier one. 

To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

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This video was recorded on Jan. 10, 2023.

Chris Hill: Good news is, we’ve got a bull market. Bad news is, it’s probably not the one you’re hoping for. Motley Fool Money starts now. I’m Chris Hill joining me today, Motley Fool Senior Analyst Bill Mann. Thanks for being here.

Bill Mann: Hey Chris, how are you?

Chris Hill: I’m doing all right, because the MSCI Asia Pacific index hit a high today that is more than 20 percent higher than the low it hit last October, which means it is officially in bull market territory. Is it time to start buying China stocks left and right?

Bill Mann: Still, over the last 5,10, and 15 years, dramatically underperforming the United States of America. Absolutely if you have been invested in the United States and you have made the choice to not invest anywhere outside of the US, you’ve made a good choice so far. But the question I guess you’re asking is, now that China is reopening is a bull market night? Is it on its way?

Chris Hill: That’s the question I’m asking and I’m not alone. I think there are a lot of people who are looking at the news coming out of China, the reopening, not just the companies that are based there, but US companies, Starbucks, McDonald’s, others that are depending on consumers in China and thinking, to use your phrasing, that a bull market is nigh.

Bill Mann: I don’t know why we’re beating the word nigh to death today. But I guess my first question would be, is it really that easy? Would we say in the United States or in Europe or anywhere else in the world that opened really in 2022, is that the way it worked? I don’t really think it is. So the thing that you have to keep in mind when it comes to China is that they are going through a lot of the same things that the growth engines in other countries, particularly the United States are going through in a way that’s even more concentrated.

Some of the big Chinese tech companies, Alibaba, Tencent, others, have laid off employees and have shuttered their headquarters and other office buildings. And it matters a whole lot more in China than it does in other countries because China’s market, its economy is essentially supply driven rather than demand-driven, and it’s really heavily dependent on real estate. I think whenever you see GDP numbers in China, I think the first thing that you have to do is to remind yourself that it’s just not the same as it is really in any other country because their domestic consumption on a relative basis is so low.

Chris Hill: There is the old saw about nature of pours a vacuum and Wall Street does as well. Since we are still days away from the official start of earnings season, it seems like at least part of the narrative around investing has been an attempt to fill that vacuum with optimism.

Bill Mann: Yes. The market is looking for things to focus on. Obviously, one thing that you should do as an investor is looking for areas where there is a change. It is true that after two-and-a-half years in China essentially being shut down longer than any other country in the world, that change is coming. But I actually think that you nailed it in terms of how you might go about responding to this is think about the Starbucks of the world and the McDonalds and companies that aren’t necessarily exposed to Chinese regulatory authorities that actually do benefit from there being more spending in China.

There are plenty of them. They are in many ways. You can get a lot of benefits from China by holding the Coca-Cola Corporation or holding Louis Vuitton if you want to own a European luxury brand. There are plenty of ways to do it. You don’t necessarily have to go out and be fancy about the kinds of companies you own and you don’t need more exposure to Chinese companies to get exposure to China.

Chris Hill: Let’s move on to Jay Powell then because the Fed Chairman gave a speech in Sweden emphasizing the need for the Central Bank to be politically independent. I’m quoting here from the speech, price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time. But restoring price stability when inflation is high can require measures that are not popular in the short-term as we raise interest rates to slow the economy. I guess for anyone who was hoping that the jobs report we got last Friday was going to make Powell and his colleagues at the Federal Reserve maybe pull their foot off the gas. This is Powell reminding everyone, no, we’re still going to do what we’ve been saying for months that we’re going to do.

Bill Mann: You have to give him credit for having the courage of his convictions. I happen to agree. I think maybe the best Fed chair that we’ve had in the last 50 years is Paul Volcker who very specifically said, our job is not to follow the wins of politics. There were two parts of what Jay Powell was saying. The first of which was, we are focusing on making inflation a force for stability, not a force for instability. If we have to slow down the economy in the meantime, that is what we’re going to do.

But also he was saying that the Federal Reserve has a structure around which it operates and it has a regulatory authority and that authority gives it some independence. For him, that independence, so that they can make unpopular decisions means that no matter how just or right popular decisions might be if they are not within the remit of the Federal Reserve, he is saying that’s not an area where we ought to be focusing. I don’t know about you, Chris, but I applaud that. I think that that level of specificity and awareness of what it is that they are supposed to be doing and what they’re not supposed to be doing is really refreshing.

Chris Hill: It is, and again, the consistency that we’ve seen, maybe part of it stems from they got the transitory port wrong a year-and-a-half ago. Maybe I don’t know maybe that’s some percentage of the equation here. But it is good to see the consistency. I also think it’s fair to assume that when the Federal Reserve is going to take their foot off the gas, they’re going to tell us.

Bill Mann: Yeah. I think that that’s right. You’re right to point to that transitory word. We should not grant admissions, we shouldn’t do it to anybody, but we shouldn’t do the Federal Reserve as well. They have ultimately fairly blunt instruments at their disposal. They don’t have a scalpel, they have a sledge hammer, and they are guessing based on data that is much more sophisticated than that which we have.

But it doesn’t mean that it necessarily is going to give them a pure reading about what’s coming down the pike. The economy is absolutely complex in ways that we don’t really think about. But it is something that they have to deal with an infinitely complex system. In some ways they’re guessing and they’re going to be wrong and they’re going to adjust, but they’re not going to do it based upon whether it’s going to make them more popular or not. I happen to think that that is, it’s the only way a central bank should be.

Chris Hill: Real quick. I want to get your thoughts on Disney CEO Bob Iger, telling employees he wants everyone back in the office four days a week starting March 1st. The reaction to this online was quick and varied. I saw a number of comments of people saying, he’s going to have a mass exodus, he’s going to have people quitting that thing. One of my main thoughts was, this is 2023, this is not 2021. We’ve been talking on this show about Goldman Sachs in Amazon and Salesforce announcing layoffs. They are only the first of more of these types of announcements to come. It’s not going to surprise me if we see more companies following suit here.

Bill Mann: Me either. I think if you were to set about the relationship between businesses and employees in 2022, it would have been that businesses had the incentive to do whatever they could do to keep employees happy, that happiness was beyond anything else. We’re at a point now with layoffs at a bunch of different companies and companies really thinking about what it is that the company needs. One of the things that Bob Iger pointed to was that he is trying to boost morale and galvanize Disney’s creative engines. That is a company that thrives on cooperation between creatives, between marketing people, between all different sets of components at, and I’m talking about Disney itself.

We’re not even necessarily talking about all of the different arms of Disney. He’s asking them to come into the office so that magic process of creativity and collaboration can happen. So if there are people who whose jobs don’t necessarily need that, I guess that’s OK. But what he is saying is that the overall morale he believes is going to be higher to the extent that that collaboration and that collective pushing toward a goal of making Disney a better company, I think it’s perfectly valid. Again, as you said, in a time in which Amazon has laid off or is laying off 18,000 people, you have layoffs across the board. I don’t know that that is something that companies need to be afraid of as they were in 2022.

Chris Hill: Bill Mann, always great talking to you. Thanks for being here.

Bill Mann: Hey, thanks, Chris.

Chris Hill: They say money can’t buy happiness, but it can help your overall wellness. Alison Southwick and Robert Brokamp, share some tips for making yourself wealthier and healthier in 2023.

Alison Southwick: The start of the new year is always a time for reflection, resolutions, and optimism for a future you. Typical new year’s resolutions are dominated with aspirations to live healthier, or wealthier, like exercise more, eat healthier, lose weight, save more money, get out of debt. If you’re aspiring to be healthier or wealthier in 2023, well, the good news is you’re about to enter a virtuous cycle, because science shows that health begets more wealth, and wealth begets better health.

Robert Brokamp: Yep, the evidence is clear, healthier people are wealthier and the other way around. So let’s look at a couple of studies. One is from the Urban Institute entitled, ‘How are income and wealth linked to health and longevity?’ The report concludes that as annual household income increases, the percentage of adults suffering from various health impairments decreases. We’re talking about things like heart disease, stroke, arthritis, hearing troubles, vision trouble, you name it. The higher a household’s income the lower the incidents of these chronic diseases. In fact, since the 1970s, wealthier people, particularly wealthy Americans, have seen their life expectancies increase by more than six years, while lower-income Americans have seen an increase of only about a year or so.

Here’s more proof. A 2018 Washington Post article, by Christopher Ingraham, looked at federal guidelines for exercise, which are that adults should perform at least 150 minutes of moderate physical activity, or 75 minutes of vigorous physical activity each week. They should also do some muscle strengthening activity, like calisthenics, lifting weights, that type of stuff, at least twice a week. Here’s what he found. The states with the lowest percentage of adults who met that criteria also tended to have lower median incomes, with lowest being Mississippi. The states with the higher percentages of adults who exercise and had also higher median incomes, with the highest being Colorado.

Alison Southwick: Health and wealth are correlated, but what about the causation? Does being healthier make you wealthier? Or does being wealthier make you healthier? Well the answer is, yes, having poor health is expensive, particularly here in the good old US of A, and being wealthier can lead to improved health, both impact the other in multiple and not always so obvious ways.

Robert Brokamp: I think most people can understand that health issues can be expensive. The more money you spend on things like copays, drugs, procedures, the less money you’re going to have leftover to save and invest. You’re also more likely to miss work, which isn’t great for your career. Relatedly, one of the biggest reasons that people retire earlier than planned is poor health. People who retire earlier than planned, they have fewer years to contribute to their 401(k)s. Their social security benefits are going to be smaller, and they’re going to have to spread their nest eggs over longer periods.

Then finally once we’re retired and getting older we want to remain independent, meaning that we can do all the activities of daily living without any help. This requires a certain amount of strength, balance, cardiovascular health, all of which is improved by exercising. Once you’re no longer able to be independent, your healthcare cost will skyrocket. Being in better shape can lower the chances that you’ll lose money to healthcare costs. But does better health cause greater wealth? Well one study says, yes, it’s entitled ‘The Effect of Exercise on Earnings’. The author, Dr. Vasilios Kosteas, found that, “Engaging in frequent exercise is associated with a 5-10 percent wage increase.” Now how could exercise lead to a bigger paycheck? Well, Dr. Kosteas suggested a few possible reasons.

First of all, evidence is clear that exercise leads to improve mental function, psychological condition, and higher energy levels. So that probably means you’re doing a better job. Exercise has also been found to have an indirect effect on job satisfaction, by directly impacting enthusiasm at work. Then exercise can also serve as a signal to potential employers that the individual is dedicated and disciplined. Or through social networking effects, because you’re working out with people who are playing games with people. You put it all together and the evidence suggests that, “Individuals who regularly engage in physical activity may have a lower probability of being unemployed and higher wages relative to non-exercisers.”

Alison Southwick: You there at home, or in your car, I don’t know where you are, walking your dog, you are listening to this show, so clearly you’re already thinking about your wealth. Now has for health, the good news is that it’s never too late to improve it and reap the wealth benefits.

Robert Brokamp: Here’s a couple of studies on this one. A Canadian study published in 2010, found that people over the age of 65 who were physically inactive incurred $1,214 more in healthcare costs each year compared to those who got some exercise. Then there’s a study of 100 people at a nursing home in Boston, and these folks had an average age of 87 and most of them used a cane or walker. Where half were assigned to an exercise program of resistance training three times a week, and more resistance was added as they progressed. After 10 weeks those in the exercise group had significantly more muscle strength and mobility in their hips and knees, and a few were even able to get rid of their walkers.

Alison Southwick: Well here at The Motley Fool, we spend our day talking about money. Neither Bro nor I are going to claim we’re experts on health, but we did ask our fellow Fools what works for them to stay healthy. It turns out there was no one size fits all solution. For example, Catie found that tech and data unlocked healthier decision-making for her.

Catie Peiper: I’m Catie with the marketing team, and I’m a big advocate for working smarter not harder with wearables. I love my Fitbit, and I recently added a continuous glucose monitor or CGM to my toolset, which has been a big game changer. I’m very data-oriented and love being able to optimize actions and behaviours in real-time. Probably why I work in marketing. Being able to get immediate feedback on the effect of a workout session, meditation session, or specific food choices has not only helped me keep consistent with my healthy habits, it’s the ultimate accountability buddy, but has also helped me customize choices based on what actually works for my body.

Alison Southwick: Well meanwhile, Jackie found that unhooking herself from the matrix and listening to her body actually led to a healthier life.

Jackie Pecquex: I’m Jackie from the marketing team. What worked for me was actually when my Fitbit died. I know a lot of people find success in following health metrics, but I would often beat myself up if I didn’t hit 10,000 steps, or get the certain number of zone minutes. Now I really try to focus on where I’m feeling tension or resistance in my body, how I’m feeling mentally, and then act accordingly. That might mean going for a walk to feel the sun on my face, if I’m feeling tired, drinking more water, if my vision is feeling blurry, do some yoga, if I feel chest or back tightness, or having a dance party in my living room, if I feel any energy pent-up.

Alison Southwick: Another Fool, Nick, found that habit-building helped him lose 92 pounds.

Nick Lutz: Hi, my name is Nick, and I’m a software developer for Motley Fool Wealth Management. I started a daily cardio routine in January of 2021, to get myself out of the emotional funk that COVID brought in 2020. I think the biggest mistake I made when starting is that I would see people running in my neighborhood on a daily basis, and I always thought those people were just super motivated every single day. What I learned, at least in my experience, is that motivation gets you started, but that’s all it does, and after a while discipline takes over.

There are all kinds of human behavior studies out there that show that it takes 2, 3, or 4 weeks to develop a habit. I think you only really need to hang onto your motivation for that long, after that you just do it without thinking about it, and it feels weird if you don’t do it. I love this lesson because I think it applies to saving and investing too. Let the motivation get you started, let the discipline keep you going. Create a habit and just do it without thinking about it.

Robert Brokamp: What we asked for Fools to offer their suggestions, what we found is a lot of them just like to take walks. You may have seen over the last couple of years, especially during the pandemic, many studies came out showing that walking, is it excellent exercise? If you want to look up some of the evidence, just google an article and discover magazine entitled ‘Why Walking Might Be One of the Best Exercises For Health’. Really for many people may be all that you need. I know for me personally, I try to take a walk every day at least an hour. The other thing that gets me out of my chair, off the couch, is that I link things that I want to do with exercise, particularly podcasts and TV shows. I can’t listen to my favorite podcast unless I am walking, riding my bike, on the treadmill or something like that. The same with my favorite TV shows, I can’t watch them unless I am on a treadmill or the elliptical.

Alison Southwick: What is your favorite podcast?

Robert Brokamp: Well, so my favorite podcast I like to share every week, at least related to finance is Animal Spirits, from the Ritholtz group. But I also think in terms of topics that I’m particularly interested in. For example I recently I’ve renewed my interest in Tom Lehrer, who you may or may not have heard of. He was a piano-playing satirist in the ’50s and ’60s. Still alive, his well into his 90s, I’m like, “What’s happened to that guy?” I just search for all the podcasts I could find on Tom Lehrer, but I can’t listen to them unless I’m exercising.

Alison Southwick: There you go. Listen to those podcasts while you’re exercising and it’ll be like you’re doing it right next to Bro.

Robert Brokamp: What do you like to do, Alison?

Alison Southwick: Well, annoyingly enough I’m one of those people who picked up pickleball during the pandemic. I will say it is not the most strenuous of sports, you’re not necessarily going to break a sweat. But it’s actually the getting outside, the moving, and above all, the social aspect of pickleball that really has helped my mental health. I know we focused a lot on physical fitness, activity, and stuff like that, but health is also about, are you getting enough sleep? Are you getting enough social interactions with people? How’s your mental health? Are you stressed? It’s not just about exercising, although of course exercising does have benefits to your mental health. There is no single path to health, or wealth, but we just hope that you spend some time finding your path to walk down in 2023, so that the 2024 you is even just a little bit healthier and wealthier for it. 

Chris Hill: As always, people on the program may have interest in the stocks they talk about. The Motley Fool may have formal recommendations for or against, so don’t buy yourselves stocks based solely on what you hear. I’m Chris Hill, thanks for listening. We’ll see you tomorrow. 

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