Market Update – March 23, 2018
I wanted to send out a quick note as we close the books on a tough week for the financial markets.
After a healthy and hearty bounce off the lows that were plumbed in February, the US stock markets have found themselves right back at those levels.
Today concluded one of the worst market weeks in a couple years, which invigorates the investigation as to its cause.
We’ve got a few clues….and they’ve conspired to T.I.C.K. us off!
In an order only to preserve the silly acronym:
Tariffs. As we know, yesterday President Trump instituted tariffs on $50 billion worth of goods coming into our country from China. Advertised as an advancement to bilateral bliss, we believe it was largely intended to punish the Chinese for intellectual property theft.
China responded last night with their own tariffs on goods worth $3 billion coming into their country from ours.
By themselves, these numbers are more symbolic than substantive. Though should rhetoric rise to wrangling, the impact could certainly slow global growth.
Interest Rates. On Wednesday, the Federal Reserve Bank raised interest rates 0.25%. This move was very well-telegraphed by the Fed and fully expected by the market. Following the meeting, new Chair Jay Powell held his first press conference as BMOF.
I thought he did great. He was articulate, confident, transparent and generally likable. All signs that he is an appointed, not elected, official!
Despite lifting the cost of money, Powell identified the ongoing areas of concern for his team – most of which had snappier acronyms than T.I.C.K. – and generally feels like the Fed is progressive in monitoring the pace of domestic economic activity.
As likeable as he may be however, the market is operating in a trust-but-verify mode as it relates to assessing the future rates hikes alluded to in Powell’s prepared remarks.
Confidence. We’ve long held that access to capital and confidence are the two axes upon which financial market pivot. When both are plentiful in supply bullishness blossoms.
Prospective trade wars, (sorry Mr. President, they are not good & not easy to win), personal data breaches (Google “Facebook and Cambridge Analytica” if you have time over the weekend) and political pandering (thankfully, I guess?, the spending bill to fund the Federal government’s operation was passed after a veto threat) do not inspire confidence that converts into investor enthusiasm.
Kudlow. Larry Kudlow is President Trump’s pick to replace Gary Cohn as the director of the National Economic Council – basically DT’s top economic advisor. In my opinion, Cohn was a large loss. Kudlow is (again, my opinion) a made-for-TV economist prone to sensationalism over substance who’ll cower quickly to coercion.
But this section is less about Kudlow than it is about the game of musical chairs being played in the White House’s West Wing.
It would be naïve to suggest that turnover is uncommon in the cabinet of any president – the demands of the job, its attendant stress and ultimate ego collisions conspire to keep the White House door revolving.
This is more about the timing and the tenuousness of the turnover. Certainly, Rex Tillerson would be a good wing-man for the sit-down with Kim Jong-un, no?
So that is why we and the financial markets are ticked. And all these items seem formidable when framed at the conclusion of a tough week of trading. But the week is the only thing that has concluded (thank goodness!)
The assessment of the politically and economically intertwined landscape is ongoing. Each of the bullets above can shift as quickly as the wind from our face to our back.
We’ll be back at it next week with fresh perspective on all these developments but do believe that calmer conditions await. We also believe that while the health of corporations was a buried story this week, it will not be long before it is the lead.
The views expressed herein are those of Doug Ciocca on March 23, 2018 and are subject to change at any time based on market or other conditions, as are statements of financial market trends, which are based on current market conditions. This information is provided as a service to clients and friends of Kavar Capital Partners, LLC solely for their own use and information. The information provided is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy or investment product, and should not be construed as, investment, legal or tax advice. Past performance does not ensure future results. Kavar Capital Partners, LLC makes no warranties with regard to the information or results obtained by its use and disclaims any liability arising out of your use of, or reliance on, the information. The information is subject to change and, although based on information that Kavar Capital Partners, LLC considers reliable, it is not guaranteed as to accuracy or completeness. This information may become outdated and we are not obligated to update any information or opinions contained herein. Articles may not necessarily reflect the investment position or the strategies of our firm.