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Stock market indices have shrugged off Iran, and begun the year by moving higher. Unless Iran chooses to somehow disrupt the supply of oil to the West, it is unlikely to have much of an impact.

There has been consistent selling in the U.S. by retail investors in 2019. Flows have been drifting out from retail investors and into the hands of companies buying back their own shares. Assuming that there is no recession in 2020, and assuming that Donald Trump is re-elected, retail investors may experience FOMO, or a fear of missing out. Historically, the period of mid-October through May is a good period for stocks, but January is, on average, particularly good for small cap stocks. The relative pe...

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In September, Trump tariffs were imposed on $112 billion more of Chinese imports. Trump now threatens to increase this to $550 billion. As a result, the World Trade Organization has now slashed its forecast for 2019 trade growth to 1.2% from 2.6%. The Chinese, Indian, Japanese, and U.S. economies are slowing. The European economy is slowing dramatically, and is now seen growing at zero in 2019. Germany is slowing because as Chinese companies export less to the U.S., they purchase less German machinery. This, plus the uncertainty of Brexit, has German companies nervous about investing.

In the U.S., the ISM manufacturing index, an important indicator for the health of the economy, contracted in...

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The New York Federal Reserve now sees a risk of recession at 33% in the next twelve months. When this indicator rises above 30%, a recession typically follows, although sometimes with a delay of 12-24 months.

The global economy is slowing nearly everywhere, but the U.S. is perceived by many as being in great shape, particularly if measured by the stock market. However, signs of a slowdown are looming in housing, construction, automobiles, and the industrial sector, in the latter case due to trade tensions between the U.S. and China. Purchasing manager Indicators are slowing, both in services and manufacturing, and the rest of the world is cause for concern, with Chinese, South Korean, Japanes...

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The first quarter of 2019 was the best for stock prices since 1998, to such an extent that some caution may be advised in the short term. While the stock market has been climbing, Wall Street analysts have been lowering earnings estimates for the first quarter. In fact median EPS estimates have fallen by 7.2%, which are some of the largest cuts to S&P 500 earnings estimates in years. This is a source of concern.


It’s often a good exercise to be mindful of “the dark side”, even when the market is rising. Fully 1/4 of all the Russell 3000 index, which represents 98% of all US stocks, operate at a loss. Last year, 83% of all IPOs came to the market with negative earnings. Real ...

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2019 is likely to be volatile, but it is unlikely that the U.S. falls into recession. The one thing that could change that is if the partial U.S. government shutdown lasts long enough.

The shutdown is becoming more expensive than the very reason for the shutdown. The U.S. President signed legislation this week promising back pay for Federal workers when the shutdown ends. The problem is that the American taxpayer will then be paying for services which never took place at a rate of $200 million per day, or around $5 billion so far, which equates to the price of the border wall. Economists estimate the partial government shutdown is costing 0.1% of GDP growth to the U.S. every two weeks. We are...

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By most measures, there is great strength in the economy at the moment, due in part to government stimulus measures, of tax cuts and increased government spending. The U.S. GDP grew at 3.2% in the first half of 2018. U.S. corporates earned record high profits in the first two quarters of 2018. For the third quarter, total earnings of S&P 500 companies are likely to be up by 17.8% on 7.1% higher revenues.


The unemployment rate has dropped to 3.7 percent, the lowest rate since December 1969, and it is likely to fall even further. For close to two-thirds of the US population, this is the lowest unemployment rate in their lifetime.
Leading indicators, manufacturing indices, CEO confidence, and con...

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In the first quarter of 2018, we have begun to see what happens when the liquidity that has driven markets for the past ten years begins to dry up.
The Fed is raising interest rates while shrinking its balance sheet. The “Paul Ryan” tax cut has created a $1.3 trillion hole in the government’s finances, which means that $1 trillion or more of Treasury debt will be issued this year, and in coming years, twice the normal amount.
The unpredictable announcements made by the U.S. president concerning tariffs have raised concerns over a tit-for-tat trade war with our major economic partners. Wall Street recognizes that tariffs tend to be damaging to the economy, just as they were wh...

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The stock market had a strong 2017, supported by strong corporate earnings, healthy economic growth, and the prospect of US tax cuts.
The tax reform passed in December has brought an already overbought stock market to nosebleed valuations. Under the new tax law, corporate tax rates have just fallen from 35 percent to 21 percent,
and foreign cash can be repatriated at a 15.5% rate. This is unquestionably good for stocks as these tax cuts go directly to the bottom line of businesses. The question is, to what extent is the tax reform already built into the market?

On a cyclically adjusted basis, the price per share of stocks relative to average earnings from the previous 10 years is at its highest...

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Looking ahead to the fourth quarter, we can focus on three things which will impact the financial markets: the Trump tax plan, corporate earnings, and the Federal Reserve.


Trump’s administration has undergone huge turnover in its first nine months, including his first national-security adviser, the deputy national-security adviser, his original chief of staff, a press secretary, two communications directors, his chief strategist, the director of the FBI, the acting head of the Justice Department., and the head of the Department of Health and Human Services.


These are only the highest level impediments to Trump’s credibility, but the list is long as the reader may be aware. The rele...

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Midway through 2017, the optimism that fueled the stock market higher after the Trump election has not yet materialized into better economic data. So far the economy is growing at an anemic 2% as it did during the Obama presidency. Job growth, investment spending growth, consumer spending growth are slower in the first six months of this year relative to 2016. Even the Federal Reserve officials have begun warning that the stock market is overvalued. The Fed has notably shifted from a dovish stance to a more hawkish one over the past month. signaling higher rates, which represent a tightening of financial conditions.


• In the words of Vice Chairman Stanley Fischer in June 28th: "P/E rati...

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