Markets - April 2018

MARKETS - What's going on?

This year and particularly lately the markets have seemed a bit crazy.

Let's look at why.

Fundamentally, it seems to be one source - TRUMP. But the second source is also TRUMP.

Let's do a Macro look at what's been happening:

  • He was elected in November of 2016.

  • The Mid-Term elections are coming up in November of 2018.

  • The U.S. House of Congress and the U.S. Senate are both controlled by a majority of Republicans. If a President had a chance to make changes this was the time.

So why hasn't that happened?

A number of fundamental issues have not been addressed.

What's happened to Health Care? Nothing.

Health care changes have gone nowhere because voters have turned up the heat on their representatives and rather than lose their own seats in the upcoming election they side with their voters.

What's happened on Immigration? Nothing.

Presidential Orders were enacted to no end and never enforced.

What's happened on the Mexican WALL? Nothing.

CLIMATE CHANGE and Coal:

This has been a negative outcome overall and to save Coal jobs. This seems odd when there are more jobs in Solar and Wind.

  • Were you aware that one of the biggest political supporters of the Republican party is a Coal Magnate Billionaire?

  • Are you also aware of the fact that person's wife in now the Ambassador to Canada?

  • Did you know he gave $1,000,000 to the Trump Election Campaign?

  • Are you aware that Coal is one the main contributors to Global Warming?

I'm simply reflecting on and connecting the dots on how U.S. policy gets made.

MAKING AMERICA GREAT AGAIN seems in question:

  • What's happened to 'Make America Great Again' well that's uncertain but I'd say not much.

  • There is more bluster and fake news than any real economic substance.

  • The only thing I see he's accomplished is a TAX reform Bill which favours the rich.

  • It's a tax bill that will automatically be reversed in 10 years. But the president will be 80 then so will he care?

ELECTION and TARIFFS:

Back to the FALL Election: He needs something substantive under his political belt well in advance of November.

In desperation he has turned to tariffs. This apparently is a unilateral move a President can make without Congress or the Senate approval. It makes him feel he's doing something and he's trying to impress his political base that he's in charge.

So what do these tariffs really represent?

  1. Higher Tariffs on Aluminum & Steels - means higher prices for goods in the US so the American taxpayer pays more.

  2. Higher tariffs on Chinese Goods - means higher prices and the American taxpayer pays more.

  3. Build a Mexican Wall - whether this comes through or not it means either the US builds it and Charges Mexico a tariff OR the US Government pays for it directly. In any case it means higher costs to American Citizens.

  4. Now with Chinese retaliation on tariffs, American farmers and manufacturers will be selling less to China. With looming lower sales and lower profits the Stock Markets react negatively and stock prices fall.

  5. Remember US and China are the world's two biggest economies and anything they do will have ripple affects elsewhere.

It seems to me he is on track to Making American Poorer, not greater.

MARKETS HATE uncertainty:

This whole move on tariffs, shakes market confidence. Corporations and farmers will be negatively impacted and the markets drop.

They see the back and forth Tariff War being negative and everybody loses.

PERSPECTIVE:

As a gauge, the S&P 500 US index had risen over 6% in January largely due to the excitement surrounding US Corporate tax cuts. The index now sits at negative 2%.

Really the Focus should be on the YTD 2% loss.

Now compare that against a 19% gain in 2017. So is a 2% loss really that significant? The answer is no.

BOTTOM LINE:

Don't be too concerned about what's happening. If anything it's a good opportunity to put more money in the Market.

Please feel free share this with others.

#marketcommentary #trump #wealthmanagement

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