The Market’s “Read’em & Reap”
Let’s put the brakes on two current beliefs:
- That there’s a big rate cut coming, and
- There’s a clean fix to the so-called Trade War.
First, if there’s a cut, it won’t be big. Nail that picture to the wall until further notice.
Second, the entire "cost" of tariffs so far is something less than $25 Billion.
Let me put that in perspective for you.
If you had $22 Trillion (the size of the US economy every 12 months) and someone told you, "Hey Bob, I think you just lost $25 Billion" you’d be hard pressed to even recognize it.
Think of it like watching a strong downpour for about 19 seconds out of your 24-hour day.
So, by the time China and the US agree there’s no solution (China can't, it's not in their political nature), companies will have already adapted, prices will have already adjusted, supply lines will have already been tweaked and the world will have moved way past the “Trade War.”
Only the politicians and media will remain stuck in it.
Maybe someday there will be a solution. But it will only be on the surface, and it won’t matter.
And Now, The Fed…
Call me a moron but if the Fed cuts rates, it’s far more likely to produce a summer swoon (as expected) than a gigantic rally.
I could easily be wrong, but we don't need a rate cut.
Now raise the cover on your bomb shelter (gently now), dust off all your bond coupons and look outside.
Folks, we’re running out of humans to take jobs that are empty. Retail sales are through the roof - even during slow summer months. Personal incomes are at records and so is personal wealth.
Places like McDonald's and Starbucks are shooting the lights out with records and the dreaded "slowdown" did not show up in the latest GDP report.
Hell, even UPS - in the midst of the "global slowdown caused by the Trade War concerns" - set all-time record highs for revenues, profits, and cash flows.
In fact, I’m pretty certain I heard a mass gasp of hysteria from the media crowd the moment the 2.1% GDP printed earlier this morning.
Under their collective breathe they said, "We gotta find another monster, guys, or no one will listen to us."
Just pray that we do not get a rate cut. It's time we all got this through our heads: We are all going to be ok. The US economy is not falling off a cliff.
The truth is, you ain’t seen nothing yet. Wait until the next decade starts.
And Now for this Brief Comedic Interlude…
It can’t be all bad, right?
We still stand by the idea that deflation is the name of the game for 2020 and beyond – we’ll thank Gen Y for that - and the low interest rates which we can expect for far longer than almost anyone currently anticipates.
Think demographics, not economics. The US leads developed nations in that category, so relax about the trade war crap.
It's a diversion.
Read'em & Reap
Of course, what's a GDP surprise without the scary sounding "spike" in rates…all the way up to 2.07%!
Now, if you haven't choked on your lemonade yet from laughter, then check these out.
I just love it when BAML "discovers" this kinda stuff:
Yes, there will still be very ugly periods ahead.
And there will be periods where you will hate your stocks with a passion, and when “all investments other than cold hard cash under my mattress” suck.
But it’s always been that way folks.
And during that time – in the 37 summers I have been at it - the market has gone from 900 up to 27,000.
Bring on the chop, folks, and enjoy the ride.