Election/Barreling Along/It’s About Employment
Election results – will they really drive CAD’s growth. Equity markets trend higher this week, even with all the political news. Next is G7 meeting & next week’s full slate of central bank meetings.
Positives: It’s the earnings that matter & US economy is barreling along – Real GDP may be starting to do so at a faster speed now exceeding the so-called 2% stall speed which was called the new normal from mid-2010 through Q1 2018 – Q2 2018 Real GDP growth 4.8% - real 2Q real consumer spending growth + 2Q private fixed investment growth increased to 3.5% + 5.4% - trucking tonnage index up 9.5% Y/Y to record high – shortage of workers in many industries like trucking – employment low will drive wages – aggregate weekly hours worked rising – all helps consumer spending & GDP. Is Fed closer to the end than the beginning of rate hikes? China doesn’t want trade tensions with the US to escalate. Trump & NAFTA – we wait – Kudlow says President doesn’t plan to quit NAFTA. It’s about employment – now more Americans working than ever before – over 148M – importantly it’s private sector driving growth – not government – 3.8% in May, lowest reading since 1969 – tax cuts + de-regulation will keep job market strong (B Wesbury).
Big picture view of market remains intact – 2018 would be more challenging year for equities with rising rates and later in the year political uncertainty from mid-term elections (Dr. J Siegel). Baltic Dry Index turning up again. “We are encouraging all public companies to consider moving away from providing quarterly EPS guidance – in our experience it often leads to an unhealthy focus on short term profits at the expense of long-term strategy growth + sustainability resulting in less technology, spending, hiring and research and development (J. Dimon & W. Buffett roundtable).Deals,M&A,cash deployment trends up.
Negatives: Japanese data suggests the economy may have slipped into a recession. Low unemployment historically precedes a recession. Trade tensions continue to inflict damage to investor psychology & business confidence – could be 4.5% hit to US equities - $1.25 trillion of value destruction (JPM). Stocks in danger zone because inflation has changed its stripes (J. Paulsen). Foreign Direct Investment into the US fell 40% in 2017 – the deepest drop in four decades that wasn’t associated with a recession. Eurozone economic growth cooled in Q1. ECB prepares for pivotal meeting next week – where central bank will discuss bond buying program. CAD + excessive regulation is why we’re having trouble attracting foreign investing (D. Rosenberg).
Investment Wisdom: “Not everything that can be counted counts, and not everything that counts can be counted.” –Albert Einstein
PORTFOLIO MANAGEMENT–Week’s Highlights
Stock of the Days: CRM, PANW, MDT, DOL
New Issues: EIF, KMP, NVU, DRG, INE, NA
Have a great weekend. Bruce
MacKay Weekly Investment Report Contents:
Page 1 - How I see It
Pages 2 & 3 - Notes and Quotes
Page 4 - CDN Mkts
Page 5 – Int’l Mkts
Page 6- Funds & ETFs
Page 7-9 – Favourite Charts
Page 10 – MacKay Group Portfolio Management
Page 11 – Comprehensive Wealth Management
Page 12 – MacKay Group News & Events