American Consequences - February 2019



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U.S. stock markets roared back in January...

reported better-than-feared earnings, forcing shorts to cover their negative bets. Trade representatives from the U.S. and China set dates for important meetings, the bellicose rhetoric was put aside, and the market was optimistic a deal could be accomplished... But there were other problems... Momentum is easing across the world’s major economies. China is seeing lower private sector investment and a slowdown in factory MRǼEXMSR8LIPEWXXMQIXLMWSGGYVVIHGSVTSVEXI TVSǻXW[IVILEQQIVIH In the U.K., Brexit remains a concern. A lack of a plan has multinational corporations leaving London in droves, bludgeoning the economy. The economic data from the region has been another weak spot, with U.K. manufacturing data at a three-year low. It’s one of the most basic rules for investing, yet it’s also one of the hardest to follow... As much as investors were worried they were dumping shares at or near the bottom in December, now the opposite is true... Investors are worried they may be buying shares at or close to a near-term top. So how do we know when it’s the right time to buy versus sell? BUY LOWAND SELL HIGH... USUALLY...

In fact, it was their best start in 30 years. The S&P 500 Index was up 8%, the Dow Jones up 7%, and the Russell 2000 up nearly 12%. Commodities were led by an 18% jump in crude prices and a 3% pop in gold. The reasons for the 180-degree reversal from December were many... The Fed’s policies were much of the reason for U.S. markets falling apart in December... The complaints from the public and private sector were that the Fed was too rigid, and it ǻREPP]HE[RIHSR+IH(LEMV/IVSQI5S[IPP that perhaps there was sound reasoning behind the uproar. The horror of late 2018 had more to do with fear of slowing global growth, trade wars, a Democrat-controlled House, and an uncooperative Federal Reserve, but a change in the calendar brought some optimism. We were delivered blowout payroll numbers. The early January report showed a gain of 312,000 jobs versus a forecast of 176,000, and average earnings grew 3.2%. This was manna from heaven and the equity gains kept piling up. Earnings season kicked in and did not disappoint. The big semiconductors delivered, returning technology to the head of the pack. Market whipping boys IBM and GE also

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February 2019

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