Vahan Janjigian, chief investment officer of Greenwich Wealth Management, said investors are ignoring two major risks in the market. The first is U.S. Treasuries, he said on CNBC’s “Street Signs Asia” last week. “I think the other major risk that investors are overlooking is the huge and growing debt in the United States and, you know, maybe more importantly, the cost of servicing the debt,” he said. “The United States has no control over spending. It keeps growing its deficits and borrowing more and more to fund them,” he added. Janjigian noted that interest on the country’s debt already exceeds its defense spending, which is approaching $1 trillion, and explained that the Federal Reserve’s efforts to combat inflation have led to higher interest rates. “The combination of massive debt and higher interest rates is simply unsustainable,” he said, adding that tax increases were “inevitable” regardless of the outcome of the U.S. election in November. “Higher taxes and pressure to reduce spending are not bullish,” he concluded. Geopolitical tensions and weak oil prices are a second risk, Janjigian said. He was “surprised” that the Russia-Ukraine war, the Israel-Hamas conflict and weak oil prices did not trigger a larger reaction from the market. “Perhaps most surprising is that oil prices are still very weak because these are two regions that are closely related to oil, but there seems to be enough oil in the market. And now, the bigger concern is that China’s demand for oil may be greater than We thought it was weaker,” Janjigian said. Global oil demand has been slowing, the International Energy Agency said in its latest monthly report, adding that China’s oil consumption, long the “engine of global oil demand growth”, shrank in April and May this year. In June, it added that Chinese oil demand shrank for a third consecutive month amid sluggish industrial activity. The IEA said demand growth will be less than 1 million barrels per day in 2024 and 2025, well below last year’s 2.1 million barrels per day. Stocks But despite these risks, Janjigian remains bullish on certain stocks. He named three companies that he believed paid “very generous” dividends: IBM, Verizon and Pfizer, and he continues to add to his position at the pharmaceutical company. He noted that all three have increased their dividends every year for years. IBM currently offers a 3.3% dividend yield, Verizon offers 6.3% and Pfizer offers 5.7%, according to FactSet. He said they are in some ways “a substitute for bonds.” “In some ways, you might say these stocks are really like bonds in that their stock prices don’t fluctuate like Nvidia does,” Janjigian said. “However, unlike bonds, the dividends will grow and there will be capital appreciation. potential.”
