Summer Rally / Made in China / Strong Winds
Equity markets continue to do well this week with many indices hitting all-time highs. Seasonal summer rally before next earnings season - possibly. Positives: FED holds rates steady and hints at possible cuts if outlook dims -the case for somewhat more accommodative policy has strengthened. Canada approves Trans Mountain pipeline expansion – with road blocks – good for jobs and economy. US Business urges Trump to end China trade dispute – US Chamber of Commerce called for a reversal of tariffs imposed over the past 2 years - proposed tariffs on a future $300 Billion of Chinese imports would dramatically expand the harm already done to consumers, workers and companies. Pr. J Siegel – If we can get both a dovish tilt from the FED and progress on the global trade front we should see further gains of 5% in the equity markets. US had a good retail sales report Friday – raises Q2 GDP estimates from low ‘1’s to 2%. Get ready for 1% bond yields (Bloomberg). World’s top bicycle makers says the era of ‘Made in China’ is over (Bloomberg). Inventories likely to rebound in months ahead, expect real US GDP growth to come in near 3% in 2019 (Q4/Q4) well above the Feds consensus projection in March of 2.1% - FEDS forecast been overly pessimistic – Fed is not that tight – they don’t need to cut rates and don’t think they will cut rates this week or this year (B Wesbury). US moves toward freer trade with other countries to help organize an effort to get China to conform to normal trade rules. Strong winds at economies back 1. Lower corporate tax boosting incentives for investment 2. FEDS fund rate is still below normal GDP growth 3. Fed Has $1.4 Trillion in excess reserves in Banking system 4. Fed cuts regulation 5. Home building has plenty of room to grow. 6. Banks strong financial shape.
Negatives: Escalation of trade tensions in recent weeks and weak global growth could lead to a slow down for US economy warranting interest rate reductions by the FED. RBC Global Asset Management believes that Canada will likely suffer more than US whenever the NA recession hits as commodity prices often get hit during a recession. This quarter could be weakness economic GDP. Investors needlessly fearful of recession starting soon – forecasters’ are merely guessing (B Wesbury). Bull/Bear ration (33R) rose again this week as bullish sentiment moved back above 50% - bargains disappear. Will China dump US bonds in retaliation for trade war?
Investment Wisdom: "Bottoms in the investment world don't end with four-year lows; they end with 10- or 15-year lows." - Jim Rogers
PORTFOLIO MANAGEMENT–Week’s Highlights
Stocks of the Day: SRU.UN, USB, CTC.A, AMZN, CNQ
New Issues: IIP.UN, BBU.UN
Have a great weekend. Bruce