The Economy: The State of The Union clearly showed the sharp divide in the U.S. electorate. Pick your flavor. Markets have cheered Trump since the election. Given the ongoing economic expansion, expect the Fed to continue to tap-the-brakes with further interest rate hikes. Jay Powell replaces Yellen as Fed Chair at cob today. Yellen was the most dovish Fed Chair in history. Powell, by contrast is on record as saying, “… it is not the Fed’s job to stop people from losing money.” This in itself will be a sea-change, if there is follow through, since the Fed has been stock market driven since the Financial Crisis. Markets, the media and investors in particular have been enamored with synchronized global growth, tax cuts, profit repatriation, one-time bonuses and historically low unemployment. The Fed interest rate moves have created every expansion and every recession; every bull and every bear market. Party on Garth!
Food for Thought: What is your long-game? Gonzo Hunter Thompson spoke for some when he said, “Life should not be a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside in a cloud of smoke, thoroughly used up, totally worn out, and loudly proclaiming “Wow! What a Ride!” For most however, there are more prosaic goals such as planning for retirement, creating an estate or other bequeaths to family, friends and charitable organizations. Annuities may be the appropriate way to achieve funding needs. Contact us if you have questions about Annuities.
Music of The Week: Chaka Khan “Chaka”
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The Economy: The Holidays are upon us and All is Beautiful. Synchronized global growth, led by the US is producing some of the best economic numbers since the Financial Crisis of 2008. Donald Trump’s foreign policy speech has outlined an America First approach that should produce economic benefits. Congress has passed the first rewrite of the Tax Code in 3-decades. Financial markets are comforted to have another unknown out of the way. Corporate profits that have been held overseas are expected to flow back to the US next year and used for dividends/share buy-backs. Share buy-backs along with the expanding economy should bode well for stock markets in 2018. San Diego continues on its growth trajectory with high/med-tech, military spending, services and tourism helping to keep the downtown skyline full of construction cranes. Pessimists still call for circling the wagons. Optimists see the Endless Summer of perfect barrels.
Food for Thought: Merry Christmas and Happy New Year! Happy Holidays! It’s been a pleasure writing for you this year. … and what a year it’s been! 2017 goes down as one of the most excitement filled years in memory. Good Excitement; Bad Excitement; Real Excitement; Fake Excitement; Lurid Excitement; Questionable Excitement. How’er ya gonna keep ’em down on the farm after all that jazz. With markets heading into the 10th year of their rocket run, US mid-term elections, Brexit moving forward, Japan re-arming, a new Federal Reserve, Draghi on his way out, more central bankers tightening the screws, 2018 will be every bit as exciting as 2017.
Music of The Week: Dean Martin’s “The Dean Martin Christmas Album”
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The Economy: On the surface things appear to be moving along quite nicely with synchronized global growth still the order of the day. Beneath the surface, changes are coming. Trump has appointed Powell as the next Fed Chair. He’ll take the helm in February 2018 and may not be the same as the old boss. With his Wall Street background, he has a different perspective. Likewise Japan where the government pension system has been authorized to invest hundreds of billions in global stock markets. Saudi Arabia is undergoing change with historic upheaval in the royal family. While the House of Saud may reap a $800 billion windfall from wealth confiscations, the end result may be the unprecedented end of support for terrorism and a rapport with Israel. Brexit continues to muddle through with calls for the end of the world becoming more muted over time. Mankind is in holiday mode as year-end approaches.
Food for Thought: After a rip-snortin’ run, stocks have taken a breather lately. Anything less than daily triple-digit gains are seen by many investors as signs of doom. Whether recent market action is the pause that refreshes or something more significant is best addressed by Donald Rumsfeld’s famous quote: “There are known knowns. There are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know.” Markets will either go up, or they will go down, or they will go sideways. Have a great weekend.
Music of The Week: Tamba Trio “Pure Bossa Nova”
The Economy: Synchronized global growth, central bank easy money and politics as usual remain the norm. China finished up its Party Conference and deified Xi alongside Mao and Deng. The ECB and the Fed met and left their respective rates unchanged. No surprise there, as global growth is still viewed as delicate. So Synchronized but delicate would be a more accurate description of global growth. But the Fed is taking the lead in normalizing monetary policy. In October it did shrink its balance sheet by about $10 billion. They also indicated that another interest rate hike was on tap for December. Thursday, Trump is expected to announce Powell as the new Fed Chair. Powell is seen as dovish and if selected is expected to maintain the lower for longer policies we’ve come to know and love.
Food for Thought: Stocks continue to march higher. A week without new records now feels like a personal insult. The rally may continue through year-end as investors pile into the markets to make up for lost time. Algorithms are appearing daily that show how markets will go up for years to come. Everyone is an aggressive risk-taker when they are making money. But how do you feel about losses? Know your risk profile.
Music of The Week: Tim Bowman’s “Circles”
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The Economy: “Synchronized Global Expansion” remains the bullish buzzword with 45 countries expanding in lock-step. This is a first in 50-years. Central bank liquidity programs and global debt are fueling the growth. The front cover of The Economist says it all, “The Bull Market in Everything.” Stocks, bonds, real estate, alternative investments, art, wine, automobiles, chopsticks. Everything and the kitchen sink has gone vertical and defies gravity. The relentless upward thrust makes the North Korean missile shoots look boring by comparison.
Food for Thought: Back in the day when there were economic cycles and price discovery, investors looked for nuggets in value or special situations. Today, the bull market steamroller has overruled causality and flattened every bear in sight. Thoughts of correction are dim; of a market crash, non-existent. Cowabunga!
Music of The Week: Shania Twain’s “Now”
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