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How Will Markets React to Growth Deceleration?

Economic fundamentals were ignored as if they were merely background noise as markets attempted once more in early August to breach their record high levels put in late last January. The common theme in the business media is that, due to great corporate earnings (24%+ in Q2), the equity markets are cheap. Never mind that a good part of that earnings growth was due to one-time tax reduction (in fact, …Read More

Will Markets React as the Trump Agenda Becomes Long-Term?

The failure to get health care reform through the House of Representatives highlights the difficulty that this President is having in bringing his legislative agenda to reality; one would think that markets would have a significant negative reaction – but, that has not been the case. For sure, the Trump rally, itself, has stalled (except in the tech sector), as the closing level of the S&P 500 on Thursday, March …Read More

Does 2.3 percent economic growth justify Dow 20,000?

A survey of 53 economists by Blue Chip Economic Indicators forecast 2.3 percent economic growth for 2017, up from an estimated 1.6 percent in 2016. While better, 2.3 percent is still low by post-World War II standards. Consensus found that inflation would tick up to 2.4 percent, industrial production would begin to grow again (+1.6 percent) after stagnating in 2016, business investment (+2.7 percent) would finally be positive (after several …Read More

The Topsy-Turvy Economy

The financial markets are hooked on easy money, low interest rates, and growth via debt issuance. Yet, it has become obvious to some market players, economists, and maybe even the Federal Reserve’s Federal Open Market Committee (the rate setting cabal), that current monetary policy is now hurting, not helping, the economy. Of course, monetary historians know that monetary policy was never meant to act alone, or in a vacuum, as …Read More

Quarterly Economic Outlook: Q3/2016

The “Brexit” caused market swoon on Wall Street turned out to be a nasty 5.3% two day dive (S&P 500) that was all but reversed in the next 4 trading sessions.  The reason was clear early on – despite forecasts of immediate worldwide economic doom and gloom, the non-binding referendum was mostly a political statement about bureaucratic government, and the referendum split along demographic lines (older vs. younger, and rural …Read More

When policies are anti-growth, sell the rallies and buy the dips

The equity markets are generally forward-looking. That’s why you have price movements that seem incompatible with the latest economic (backward-looking) data. The equity market today, as seen through the eyes of the S&P 500, has been flirting with all-time highs while the economic data indicate that the economy continues on feeble legs. So, just as the “forward-looking” market has predicted 25 of the last 8 recessions, so too, it can …Read More