Good News, Everywhere You Look
Author: Greg Valliere
April 2, 2019
GOLDILOCKS ON STEROIDS: The evidence is overwhelming — everywhere we look, the news is bullish, even on the policy front. There are a few exceptions (Brexit in particular) but the second quarter is beginning with extraordinarily good news:
The economy: The recession scare has been grossly overblown — really, how can analysts forecast a recession with easy money and unemployment under 4% ?? Inflation is moderate despite higher energy costs; the labor market is so tight that wages eventually will have to rise; interest rates are remarkably low; there’s no serious threat to corporate earnings. Of course, we all knew this — what’s under-appreciated are at least six policy positives:
1. Financial services reform: Check out the excellent article in the Wall Street Journal this morning on the likelihood that both houses will pass legislation this year to reform retirement savings plans. Reforms could include repeal of the age cap for contributions to individual retirement plans, and abolition of restrictions on what small firms can offer.
2. Progress on trade talks: Presidents Trump and Xi still want a deal, and they will get one. We talked yesterday with a trade expert who still thinks it may take a couple more months to nail down a final compromise, but he’s convinced that both sides are nearing a historic pact later this spring.
3. There’s no serious geopolitical threat: ISIS has been crushed, there’s been no serious terrorism in the West for over a year (knock on wood), trade wars have been averted, growth is percolating in emerging markets, and while the U.S. may sound hawkish toward Venezuela, Washington will not intervene. Yes, the U.S. seems isolated from much of the world, but a $750 billion annual defense budget sends a signal.
4. Donald Trump listens: Who knew? The president decided to fold a weak hand yesterday on health care. Republicans firmly told him in recent days that the GOP has no plan on health reform, and he actually listened. A bruising and fruitless battle has been avoided, which could free up time for debate on infrastructure.
5. The deficit doesn’t matter: Let’s be blunt — the hand-wringing by Cassandras over budget deficits has been spectacularly wrong, for one major reason: there’s a demand for Treasury paper that’s so insatiable that even $1 trillion annual deficits can be accommodated. The deficit clearly has helped stimulate GDP growth.
6. The socialism hype: Finally, we reiterate what we wrote last Friday — the endless hype about a looming socialist agenda and tax hikes is grossly exaggerated; there aren’t enough votes in the Senate for this agenda and there won’t be for years to come. A few of our readers emailed that these fears could become legitimate early in the next decade, and we suppose it’s possible — but that’s a distant threat as the sunny second quarter begins.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI is registered as a portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
© 2020 AGF Management Limited. All rights reserved.
