While politics and the new government's agenda is still very much in the news, investor interest last week shifted to the bigger picture.
We touch on several bases today. We begin with the Heritage Foundation’s annual Economic Freedom Index, which plunged during the eight years of the Obama presidency. From there, we look at some recent economic data which is quite encouraging overall.
We have another holiday-shortened week with little fresh data. While there are some Fed speakers on tap, it is not enough to feed the avaricious punditry.
We sipped the QE juice and loved the taste. Now we’re full… the game has changed. The Fed had assets worth $858 billion on its books in the week ended August 1, 2007 just before the start of the financial crisis, and the same stood at $2.24 trillion at the end of 2009.
Nearly all analysts who write about the housing bubble have focused on the purchasing madness that occurred. While this is important, it overlooks the refinancing insanity of 2004-2007. This refinancing lunacy will devastate mortgage and housing markets for years to come.
Inflation just got another jolt, rising as much as 2.5 percent year-over-year in January, the highest such rate since March 2012. Led by higher gasoline, rent and health care costs, consumer prices have now advanced for the sixth straight month. In addition, January is the second straight month for rates to be above the Federal Reserve’s target of 2 percent.
Frontier markets were mixed in 2016, with most of the Middle East and Africa lagging the rest of the universe and a few markets surging ahead 30-40% on the year.
Andrew Ross Sorkin of CNBC and The New York Times wrote an article this week entitled, “A Quiet Giant of Investing Weighs In on Trump.” It’s about the recent investor letter penned by one of the all-time great investors, Seth Klarman. Many hedge fund managers write privately to their clients yet these letters often find a way on to the internet.
I expect to see little change in Fed policy. The new President will wind up appointing people with traditional credentials, but perhaps with different policy viewpoints. He will not reappoint Yellen, although people forget that the Fed Chair is often appointed by Presidents of both parties.
If there’s any point in U.S. stock market history, next to the market peaks of 1929 and 2000, that has deserved a time-stamp of speculative euphoria that will be bewildering in hindsight, now is that moment.
Back in November, I wrote that domestic carriers are likely to see the new president—himself the former owner of the now-defunct Trump Airlines—as a strong partner in several key areas. Although a couple of airline CEOs have recently expressed strong opposition to some of Trump’s protectionist immigration policies, yesterday’s meeting appeared to be constructive, with the president telling the group he would soon be announcing something “phenomenal in terms of tax and developing our aviation infrastructure.”
The 2016 presidential election has brought about widely anticipated changes in fiscal policy actions.
Just as I do with the economy, I review the market each month for warning signs of trouble in the near future. Although valuations are now high—a noted risk factor in past bear markets—markets can stay expensive (or get much more expensive) for years and years, which doesn’t give us much to go on timing-wise.
A new report from the Congressional Budget Office (CBO) predicts that the US unemployment rate will continue to fall through 2018. The same study predicts that growth in hourly wages will increase significantly this year and next. I’ll give you the details on this uplifting report as we go along today.
The staple of corporate-sponsored retirement savings is 401(k) plans. Another option – state-run retirement plans – offers some advantages, but faces some daunting obstacles that hinders their widespread acceptance.
We have a rather light week for economic data. The biggest reports came last week. Earnings season continues. Everyone is keeping a close eye on President Trump, wondering what might happen next. Meanwhile, stocks are at all-time highs and interest rates have stabilized.
Last week I shared a chart with you that’s done a good job at signaling inflation. We tend to react slowly to news and, over time, we wake up. Then we herd in and out. In the “waking up” category, we better keep rising inflation on our radar.
After little more than two weeks, President Donald Trump’s honeymoon with Wall Street appears to have been put on hold—for the moment, at least—with major indices making only tepid moves since his January 20 inauguration. That includes the small-cap Russell 2000 Index, which surged in the days following Election Day on hopes that Trump’s pledge to roll back regulations and lower corporate taxes would benefit domestic small businesses the most.
Earlier this month, David Zahn, head of European Fixed Income, Franklin Templeton Fixed Income Group, set out some thoughts on the political and economic landscape for Europe in 2017.
Investors need to prepare for more extreme economic outcomes – both good and bad.
Tomorrow marks the Lunar New Year, the most important date in the Chinese calendar. It’s also the start of the longest holiday at two weeks, during which the largest mass migration of humans occurs every year as families reunite and go on vacations, both domestic and overseas.
On December 7, 2016, Italy's Prime Minister Matteo Renzi resigned following defeat in a national referendum, that he had supported, that would have changed the country's parliamentary system.
Faced with a Tweeter-in-chief, how are investors to navigate what’s ahead? Is there a strategy behind President Trump’s outbursts; and if so, how shall investors position themselves to protect their portfolios or profit from it?
Crowd sizes, Alternative Facts, The Bee Movie, Madonna, Tax Returns, Twitter, Facebook, 24-hour news channels and Saturday Night Live. If you enjoy political entertainment, then now is your time.
The Ten Surprises of 2017 have a generally constructive tone. President Trump campaigned promising significant change to the American people. He raised expectations, and that’s why he won.
We have often written that when everyone is asking the same question, it is usually the wrong question. However, I have also found the converse to be quite true – if no one is asking a question, it is probably one that you want to at least ask yourself just in case.
We have a normal calendar for economic data. There will be important news will come from corporate earnings reports. Since this earnings season is part of an inflection point – the end of the earnings recession– it is special.
Small businesses and entrepreneurs have had a rough time of it for these past eight years. New startups and entrepreneurial activity have pretty much been stagnant, weighed down by heavy regulation, high taxes and an economy that’s just been stumbling along.
By now, you have likely heard something, either directly or indirectly, about “The Great Rotation” from bonds into stocks.
My scorecard for earnings season will look for the following company characteristics: Confidence. I expect most to have a murky outlook, with no reason to set the future bar very high. Important trade relationships – imports or exports. Comments on these fears may create some buying opportunities. Concern about a stronger dollar. Everyone is teed up to watch for this, and we should as well.
ust as I do with the economy, I review the market each month for warning signs of trouble in the near future. Although valuations are now high—a noted risk factor in past bear markets—markets can stay expensive (or get much more expensive) for years and years, which doesn’t give us much to go on timing-wise.
The opinions of experts concerning the future are accorded great weight . . . but they’re still just opinions. Experts may be right more often than the rest of us, but they’re unlikely to be right all the time, or anything close to it. This year’s election season gave us plenty of opportunities to see expert opinion in action. I’ll start this memo by reflecting on them.
The search for investment portfolio returns is not going to get any easier in 2017 against a backdrop of record U.S. equity prices, narrow credit spreads and low bond yields.
Investors will confront excessive debt, high P/E levels and political uncertainty as they enter the Trump presidential era. In response, according to Jeffrey Gundlach, U.S.-centric portfolios should diversify globally.
I believe this rally was the result of animal spirits based on the notion that Trump’s pro-growth policies will support the economy. At the same time, many investors assume that growth in the economy will lead to upticks in inflation and interest rates, which—along with lighter regulations—are perceived as positive for business.
Some sort of fund repatriation will be part of the package. All else equal, that suggests a bias to companies that might gain the most. The Atlanta Fed provides some hard data. Expect tax cuts, probably including some nods to Democrats. This will represent fiscal stimulus. Cyclicals continue to show strength, partly from the expectation noted above. (Eddy Elfenbein). The trade war is likely to be a bargaining approach. It is an error to over-react on speculation. The health care issue is far from settled. Early symbolic repeal? Yes. Real changes? Unclear.
Strong future growth is rooted in some basic dynamics in which Asia Pacific excels.
I find it curious that many in the financial media continue to have a bias against gold, even though it generated better returns in 2016 than 10-year Treasuries and the U.S. dollar, which performed half as well. And when it was up as much as 28 percent in the summer, they still didn’t have anything positive to say, arguing it had gone up too much.
One topic noticeably absent from the recent presidential election was the U.S. government debt. In fact, the topic seems to have fallen from public consciousness. In the medium term we do not expect current debt levels to cause a shock, but the longer-term effects could drag on growth, especially with an aging population and sluggish economic growth.
In 2016, the U.S. economy navigated some difficult challenges including low oil prices, a strong dollar, tightening financial conditions, and the threat of deflation.
Each year I make a practice of reviewing The Ten Surprises of the year that has passed. Last year’s list was on its way to being one of my best and then Donald Trump won the presidential election and everything changed.
2017 begins with plenty of economic data crammed into a short week. While most expected at least a touch of Dow 20K last week, it did not happen. The conversation quickly shifted to why the rally stalled out. In the coming week, the punditry will be asking: Should we expect a weak start to 2017?
Something is brewing in the economy. Since the election of Donald Trump, interest rates have spiked, copper prices have surged, and various sectors of the stock market have swung “bigly” on speculation of what “Trumponomics” will bring.
Included in this week’s On My Radar: -Pension Fund Red Ink – Check Out Your State (Chart) -Foreigners are Dumping Treasury Bonds at Record Rate -The Year in Review -Trade Signals – Strong Dollar, Weak Gold, Equity Trend Up, Bond Trend Down, Sentiment Remains Far Too Optimistic
As we head into the New Year, I want to share with you the six most popular Frank Talk posts of 2016. Before I do that, however, I think it’s important to note one recurring theme I write about that continues to help our investment team and shareholders better understand the movement in commodities and energy: the purchasing managers’ index (PMI).
As the year winds down, our weekly commentaries have reviewed how 2016 forecasts played out, and we do the same this week with a review of fixed income.
