Lawrence Kudlow, President Trump's head economic advisor, coined the phrase, “Corporate profits are the mother’s milk of the stock market." Without profits, stocks will not go up in value. Corporate profits for Q2 have been coming in better than expected and should be leading the market higher. We believe current trade negations and the mid-term elections are currently weighing the… View More
We wanted to bring you this news as it unfolds. We have noted that the Trump Administration is considering indexing capital gains taxes to inflation. Under the proposal Mnuchin has the legal authority to change the indexing of capital gains taxes from nominal terms to inflation-adjusted terms, without an act of Congress. The proposal would eliminate taxing inflationary capital gains by indexing that gain to inflation and taxing only the after-inflation… View More
Our view over the past four weeks was that the Trump Administration needed a win on trade (outside of China) to build support for larger escalation with China. This process is now in place. After weeks of rising trade tensions, the U.S. and EU meeting last week resulted in some rare positive trade-related news. It is unclear whether this marks a broader shift away from protectionism or is an isolated event. But at this point, the bar for positive surprises is so low that… View More
We continue to believe that there is a disconnect between the strong US economy / robust corporate earnings and the wall-of-worry (trade, yield curve, debt levels, mid-term elections, etc.). Politics are trumping economics this midterm election year, but our base case remains intact: investors are underestimating the stimulative effects of fiscal stimulus and regulatory easing while overestimating the potential negative impacts of a trade war, a rotation (not a fade) in… View More
The major indices, with the exception of the Russell 2000® Index, which has dominated markets for most of this year, closed higher last week even after a mid-week pullback following the announcement by the U.S. of an additional $200 billion worth of tariffs on Chinese goods in late August. As of Friday, the Chinese government had not yet responded. The equity markets rebounded strongly on Friday; for the week the Dow Jones Industrial Average led the indices with a 2.30% gain;… View More