Jeff’s Stock Market Commentary: Continued US & Global Growth
Is The Trump Rally Over?
Summary: Although the US major stock markets are at or near all-time highs, the economic data signals continued US and global growth. My viewpoint is that we are still in the early stages of what could be a multi-year growth cycle.
If you listen to the talking heads on the business news channels it is likely that you will come away thinking that the market is overbought and on the verge of another crash reminiscent of 2000-2003 or 2008. As I talk with people (not my clients) I tend to hear the same thing—the markets are too high—then they talk about something like ‘valuation’. Granted, it is hard to argue that there is more upside potential ahead when the markets are already at all-time highs.
I distinctly remember making a similar argument in June and July of 2015 and back then the market drifted down throughout the summer and declined around 15% in August of that year.
So what makes it different now from back then?
The economic data. In June of 2015 the economy was already starting to show signs of slowing after a multi-year period of growth. As I’ve said in previous commentaries, my analysis of how to invest starts by looking at whether the economic tide is coming in or going out.
Last week I read a book that referred to Donald Trump as the ‘Chaos Candidate’. What we have witnessed in the last two weeks sure fits the definition of chaos:
We have seen contentious nominee hearings.
We have seen Democrats boycott the hearings to delay votes, thus very few votes have occurred for his nominees.
The Republicans at the meeting in Philadelphia seem to be singing the same establishment tune they have been for months/years. (and that has resulted in low approval ratings)
Now we have a Supreme Court nominee where President Trump is already suggesting using the ‘nuclear option’ to get Gorsuch appointed. Doing so could possibly change the threshold of all future Supreme Court nominations.
Jeff’s Weekly Stock Market Commentary: Is The Federal Reserve Confused?
Federal Reserve Chairwoman Janet Yellen testified before Congress yesterday—I’m sure we were all glued to our TV’s hanging on her every word…NOT! Did we really expect her to say anything new and/or to change course? I didn’t. Last week she confirmed that the economy is continuing to slow down and that poses ‘risks’ to her forecast for growth. Thus rate hikes for this month are off the table.
A brief recap for my clients (they have a life and are out enjoying it instead of parked in front of CNBC) is that our esteemed Fed Chairwoman seems to be confused. Changes in the direction of interest rates traditionally occur slowly over time so that the markets can build those projections into their investing logic.
The more visibility in the economy and the interest rate environment the easier it is for investors and money managers to structure their portfolio for the long-term.
Over the last several months I have said that I believe we have seen the market ‘highs’ (2133 on the S&P 500) and that we may see the recent lows (1810 on the S&P500) broken.
As we entered into 2016, the S&P500 had the worst first 6 weeks in the history of the S&P 500….EVER. It plunged 12%. Since then it has surged back up to 2064. If you listen to the Wall Street System pundits, you’d think that everything is fantastic!
Hmmm. I don’t agree. Let’s put this recent surge in the S&P 500 in context.