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Daily Archives: September 14, 2017
Update – Washington
The U.S. stock market has jumped since the November 8th election. We identified 4 initiatives on which the U.S. stock market is speculating to be successfully accomplished early in the Trump administration. What will happen next? It’s still to be determined!
The 4 initiatives will have a tremendous influence on the “Heat Map” which forms the basis of our forward looking view of the U.S. economy. We consider the success or failure of the 4 initiatives to be “leading” indicators for the Heat Map.
Below are the 4 Trump administration initiatives upon which the stock market is speculating and what progress, if any, has been made:
- Tax cuts and tax reforms benefiting most individuals and businesses. NO PROGRESS RECENTLY. CUMULATIVE PROGRESS TOWARD GOAL: 0%
- Infrastructure spending of up to $1 Trillion over the upcoming 7 to 10 years. NO PROGRESS RECENTLY. CUMULATIVE PROGRESS TOWARD GOAL: 0%
- Affordable Care Act amendment, reform or reorganization. ON ITS SECOND ATTEMPT, THE HOUSE OF REPRESENTATIVES PASSED LEGISLATION TO REVISE IT. THE SENATE HAS FAILED TO BRING THE BILL AND HAS FAILED TO PASS THE HOUSE’S VERSION OR ANY OTHER. CUMULATIVE PROGRESS TOWARD THIS GOAL IS 0%.
- Roll back of government regulations and Executive Orders considered to be difficult for businesses. ROLL BACKS HAVE CONTINUED. CUMULATIVE PROGRESS TOWARD GOAL: 40%
As the action happens in Washington on these 4 initiatives, don’t be surprised if the political “tug and pull” contest results in a wilder than normal stock and bond market.
We will continue to report in future issues on the progress on each initiative.
The “Heat Map”
Most of the time, the U.S. stock market looks to 3 factors (call them the “pillars” which support the stock market) to support its upward trend – let’s grade each of the pillars.
CONSUMER SPENDING: This grade is a B+ (favorable).
THE FED AND ITS POLICIES: This factor is rated C- (Below average).
BUSINESS PROFITABILITY: This factor’s grade is A- (very favorable).
OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 6. These risks deserve our ongoing attention.
The Numbers
Last week, Foreign stocks and Bonds increased. U.S. Stocks declined. During the last 12 months, STOCKS outperformed BONDS.
|
Returns through 9-8-2017 |
1-week |
Y-T-D |
1-Year |
3-Years |
5-Years |
10-Years |
|
Bonds- BarCap Aggregate Index |
.5 |
3.9 |
1.0 |
2.9 |
2.3 |
4.3 |
|
US Stocks-Standard & Poor’s 500 |
-.6 |
11.5 |
15.2 |
9.5 |
13.7 |
7.7 |
|
Foreign Stocks- MS EAFE Developed Countries |
.8 |
18.5 |
15.8 |
3.4 |
8.1 |
1.8 |
Source: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends.