Taxes Go Down, Markets Go Up
A Financial Teeter Totter
Markets Steam Ahead Despite Natural Disasters and Political Chaos
With apologies to the U.S. Postal Service, it seems that none of the hurricanes, fires, geopolitical nuclear threats, the hacking and release of critical personal information of probably everyone reading this, alleged Russian influence on the presidential election, or a restive domestic political circus could keep stocks from their appointed gains. While any of the above could have derailed the consistency of the advancing markets, ultimately none could thwart the upward march for long. With a tailwind made up of low inflation, modest but sustainable growth, and improved corporate profits, the economic climate was ideal for continued stock gains. These factors overshadowed the political chaos and natural disasters we have been experiencing.
Markets Ignore Political Drama
While headlines coming out of Washington continue to sow angst for some, the economy has continued to post a modest but positive rate of growth and the stock market has continued its upward trend established since last Fall's election.The pieces of the jigsaw puzzle that make up the overall economy and markets are largely in place to make for a pretty nice picture, resulting in enough confidence to override other concerns.
Stocks Surge Again: Is There Steam Left?
The optimism of the previous (fourth) quarter carried over into the new year, with stock indices posting all-time highs. The gains notched in the first quarter would, in many years, be considered normal for an entire year. Most of the gains took place in the first two months of the quarter as a continuation of what has been called the "Trump Bump". Stocks had been riding the coattails of continued modest but sustainable economic growth. Anticipation for federal spending and regulatory changes has continued that momentum. Enthusiasm waned in March as the expectations for change collided head on with a divided Republican party and the inability to pass new health care legislation. The upcoming proposed tax law changes and the conflict between promised infrastructure spending and deficit spending and the debt limit could create a headwind for the new administration. Even though the Republican party controls the White House, the House, and even the Senate, political fractures have limited legislative results. President Trump has made liberal use of Executive Orders to accomplish a laundry list of actions he promised, but that has its limits. The President will increasingly confront the hard issue of what can and cannot be done based solely on his will. He will need the support of Congress for more sweeping changes. This is not to say the party is definitely over. The potential for economic stimulation is still out there, if a way can be found without creating massive deficits.
Markets Play Trump Card
With pomp, splendor, and much uncertainty, our country inaugurated a new President this past week. Our country remains divided nearly evenly between those celebrating the election and those who are texting "OMG". While President Trump pushes for change, many within his own party are feeling that their political dynasty-thinking and their sense of control over the political process is being threatened. With the sealing of the process complete, let's hope for the best. At a minimum it will be interesting to see how the political circus plays out. It is sure to be quite a show.
Can We Vote Early and Just Be Done With It?
The media is saturated with political coverage, displacing the reality of human existence. Sometimes you have to stake your claim on your own common sense and sanity by turning off all sources of media before you begin to think that the sunrises and sunsets are commanded by whatever one candidate has said about another. Not that it is unimportant, but it would be nice to just get this insane election year over with and move on. Regardless of the media's fanning of the flames of discontent, we will survive as we have in the past.
Market Reaches All-Time High Amid Turmoil
Sometimes you just have to shake your head. With England having voted to leave the European Union (the "Brexit"), hostilities continuing in the Mid East, negative interest rates spreading across the globe, and violent acts of atrocity occurring with seemingly increased frequency both here and abroad, the U.S. stock market has charged through bouts of volatility into all-time high territory. Bond prices have also soared, driving bond yields ever lower.
Improvements Here, Still Not So Great Overseas
The year started out very much like last year—but for different reasons. This year experienced a January selloff—then a recovery to nearly all-time market highs. It took some time for markets to make it into the black. In fact, it wasn't until March 17th that the Dow Jones Industrials Average crawled its way into the plus column.
A Tummy Tickler
Just like the feeling we get when a fast-moving car crests a rise in the road and begins downhill, the markets have given us a "tummy tickler" for the past several weeks. After six consecutive years of churning out gains, we reached a short-term crest and have witnessed a decline. This hasn't been anything to cheer about or to make one want more.It has given the average investor a bit of an unwanted thrill. We are likely to return to a more stable road as bargain-buyers return to the market.
Rocky Quarter The Pause That Refreshes?
There's no getting around it: last quarter was a bit like a Mad Hatter's tea party—or Mr. Toad's Wild Ride, if you prefer. Many factors converged to shake up the markets: China's surprise devaluation of their currency and their stock market's abrupt return to earth; concerns about US growth that cast the impending interest rate increase in limbo; oil prices declining below $40 per barrel; a selloff in biotech and healthcare stocks; concern about a global slowdown in economic activity. There are many things to point to as causes for the 6-week correction that took down the Dow Jones Industrial Average by 13.5% and the S&P 500 index by 11.9%.
Back To The Starting Point
Not to be mistaken as a complaint, but the U.S. economy offers few reasons for volatility. We have had to look elsewhere (Greece, China, Puerto Rico) for a directional spark. Our own economic growth rate has a bad case of anemia and anything that might be considered a robust surge in employment is so far on the horizon that we might mistake it for Chimney Rock on the distant plains of western Nebraska. Is this all that bad?
Is Fuel For The Stock Rally Declining?
Sometimes the markets offer a perfect illustration of contrasts. While here in the U.S. we have been experiencing steady economic growth, the Eurozone has been firmly entrenched in a recession. Our stocks were flat this quarter, yet the Eurozone's stocks reached a 15-year high. Go Figure.