The Economy: The economy appears to be expanding quite nicely and business optimism continues to rise as it approaches new records. The Left Coast, with its gateway to Asian trade, technology and Pentagon spending continues to boom along. Construction cranes fill the skies. New homes are stuffed into every nook and cranny. Roadwork and infrastructure projects are everywhere. New cars abound. Recently launched multi-million dollar yachts overwhelm the docks. Planes are jammed. Restaurants are packed. Exotic vacations are booked years ahead. The stock market confirms this rock ‘n roll fantasy narrative with many indices at or near their highs. Understand that only 3 tech stocks account for 70% of index gains this year. So the question is, “Can you be a cockeyed optimist and a contrarian at the same time?” The answer is yes. Now we’re entering earnings season with projections for year-over-year increases of 20%, Is this the beginning, the end of the beginning or the beginning of the end. Only Elon Musk knows for sure. China, Russia, North Korea, Syria, Turkey, UN, NATO, Trade Wars, Immigration Wars, SCOTUS Wars, Mid-Term Election Wars, Culture Wars, Religious Wars … and rising interest rates. Not to worry.
Food for Thought: Youth is wasted on the young and the wisdom of the ages is simply wasted. We will continue to emphasize the importance of interest rates and what the yield curve is telling us. While there will always be a bull market somewhere, most investors have a significant portion of their financial assets in fixed income. The old saw, “Stocks, bonds and cash.” The beginning point for most portfolio allocations is about 40% in fixed income; e.g. the bond market. So when I emphasize having an exit strategy, I’m particularly talking about having an exit strategy for fixed income. Contact me if you have questions on how to risk proof your portfolio.