On the Verge of Great Things Only if…

The markets are churning within tight ranges unable to break up or down, as there is so much good happening in the world that is being neutralized by politics in DC. I put the blame squarely on Trump and the inability of our politicians to act like adults. We are right there on the verge of a potential breakout with economic growth accelerating above 3%; corporate profits expanding over 10%; and stock markets rising to major new highs coupled with a steepening yield curve. However, we are stuck in a quagmire in DC with negative media sound bites all the time.

Our markets should be even higher today based on existing levels of corporate profits and interest rates. The push-me, pull-me markets are caught between strong global fundamentals on one hand and offset by a lack of confidence in our political system on the other hand. Stalemate in DC is no longer positive for the markets, as we need action to get us out of the economic quagmire that we have been in for years.

The foolishness is that everyone knows we need to:

  1. Overhaul/update the tax system and bring it into the 21st century
  2. Reduce excessive regulations that have stifled business and job creation
  3. Rebuild/modernize the infrastructure that is outdated/falling apart to make us more productive and competitive
  4. Strengthen our national defenses while rebuilding the status of America in the world
  5. Reform our healthcare system to provide better services at lower costs for all Americans
  6. Change our immigration policy making our borders safe while promoting domestic growth
  7. Improve/upgrade our education system and provide job training for the new economy
  8. Be energy independent
  9. Improve our trade imbalances by promoting fair trade

Do you find any of the items listed above controversial? It’s in our politicians’ hands to act and unleash our economy to reach its true potential only if…

How can you sell a market when:

  1. The global economy is improving including the U.S.
  2. Corporate profits are accelerating
  3. Interest rates remain ridiculously low and monetary authorities everywhere are apt to remain one step behind for the foreseeable future
  4. The dollar is firm
  5. Regulations including Dodd Frank are being reduced that will help stimulate growth
  6. The stock market is undervalued based on today’s profits and interest rates
  7. Relations with China are on the upswing…note our recent trade deal with them and also their efforts to promote trade amongst their neighbors!
  8. China is dealing with its own financial issues including too much leverage and speculation. It has the reserves to handle the problem while investing to sustain growth above 6.5%. Don’t bet against China!
  9. OPEC is holding together and oil prices remain above $45/barrel
  10. M & A activity remains strong as well as corporate restructurings
  11. U.S. relations are improving with Europe, the Middle East and Asia
  12. South Korea may even be willing to open talks with North Korea after its recent election

We are on the cusp of so many really good things happening led by a pro-business, pro-growth President. Besides all of the items mentioned above, I want to emphasize that corporations continue to change their stripes right in front of our eyes recognizing that technological upgrades and competitive strategies are requirements to be successful in the “new” economy. Disruptors are having a huge impact everywhere thanks to major technological advancement being made. Just look at the retail space, which I have been discussing for three years and you will get what I mean. The box stores are a dying breed. Who doesn’t shop on Amazon?

The bottom line is that the stock market is undervalued even today and there are so many things on the horizon that can occur to take the markets to major new highs. Patience is needed and will be rewarded as change is clearly in the air. Reflation remains the new over-riding trend.

Every stock in our portfolio has multiple ways to win. We only own best-in-class with great management teams with the foresight to adapt to the “new” economy and win. Paix et Prospérité continues to outperform the averages by sticking to our disciplines. Truthfully I have rarely seen so much opportunity to profit from either side of the market than today only if…

Review all the facts; pause, reflect and consider mindset shifts; analyze your asset composition and risk controls; do in-depth independent research and ..

Invest Accordingly!

Bill Ehrman
Paix et Prospérité LLC

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