“You can’t always get what you want… you can’t always get what you want… you can’t always get what you want… but if you try sometimes… well, you might find… you get what you need.”
It’s hard to believe that this Rolling Stones classic from the “Let It Bleed” album is fifty years old. Drummer Charlie Watts is not heard on the track because, as Mick Jagger said, “he couldn’t play the groove” (session player, Jimmy Miller, did the honors). That obscurity duly noted, the song is still one of my favorites. The application for this missive, as you might imagine, has to do with President Trump.
I think it’s a fair statement to say that the President would want everything related to the impeachment saga to be quashed. He would almost certainly desire to hear less news about his attorney, Rudy Giuliani, consorting with two Ukrainians charged with felonies. He’d probably be happy to have criticism of his policy to withdraw troops from Syria be silenced. However, none of the above seems to be happening anytime soon.
That being said, Trump did receive two things over the past week that he truly needed: the killing of ISIS leader Abu Bakr Al-Baghdadi and the Federal Reserve lowering interest rates by another quarter-point. Al-Baghdadi’s death was an occasion for a victory lap, although some pundits decried his less than circumspect news conference announcing the event. Cheaper money in the face of a slowing economy is perhaps even more important for Trump’s psyche.
I have opined for a couple of months that the linchpin for the President’s re-election hopes is rooted in the stock market remaining at current or higher levels. For many voters, impeachment proceedings are nowhere near as important as their net worth statements. Folks have selected candidates for decades based on their pocketbooks, and there’s no apparent reason for this trend to cease. Therefore, it’s critical for the markets to remain robust, at least until a year from now. The President will continue to do everything in his power to make sure that this goal is achieved.
I disagree with the Fed’s recent decision. I also didn’t feel that the previous rate cut was warranted. I’m an outlier here since I’d prefer to have the Fed keep dry powder on hand in the event of a truly serious economic downturn. The newly released Gross Domestic Product (GDP) figure of 1.9% for third-quarter does indeed signal a slowing economy. But 1.9% is growth, albeit rather anemic. The definition of a recession is two consecutive quarters of negative growth. Fed Chairman Powell’s decision to lower rates is either bowing to the relentless pressure of President Trump and Wall Street or the harbinger of seriously bad times ahead. I’m not buying the latter supposition, at least in the near term. The US economy is largely based on the health of the consumer, and that segment seems to be alive and well. Look at upscale restaurants in your city on weeknights… are they busy? You bet. Are flights and cruise ships full? Yep. Thoroughbred horse sales, arguably a terrific example of purely discretionary spending, continue to break records. Predictions of holiday spending are positing year over year increases. I’m not waving the recession flag yet, and neither is the stock market.
October was positive overall for equities, and relatively flat for fixed income and commodities. All three major averages hit new highs during the month, and there appears to be additional upward momentum on the horizon. As some economists wring their hands, remember this important metric: the dividend yield on the S&P 500 is higher than the ten-year Treasury rate. Isn’t this simple fact alone a reason to own stocks until fiscal monetary policy changes? I think so. Yes, we can have a correction at any time. However, I still feel that the macro landscape is mildly positive.
As always, our investment team is monitoring portfolio performance. Please feel free to reach out to us at any time. We’re thankful for your continued support and trust. As the holidays roll around, maybe we’ll get what we both want and need. A Santa Claus rally would give us ‘Satisfaction’ on both fronts.”
|The opinions expressed in this letter are those of William Schiffman and should not be construed as specific investment advice. All information is believed to be from reliable sources; however, no representation is made to its completeness or accuracy. All economic and performance information is historical and not indicative of future results. Diversification cannot assure a profit or guarantee against a loss. The S&P 500 Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. Indices are unmanaged and do not incur fees. One cannot directly invest in an index.
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