May 6: The mild and steady start for this year should not lead to complacence. Further stimulus and strong corporate earnings portend that a steady-as-she-goes stock market could continue. Recent worries have arisen due to the fear that central banks could start to ease off on monetary support, as the Bank of Canada has begun to do and as Janet Yellen has warned. While the Fed here in the U.S. has remained very dovish, that could change if economic conditions improve above expectations. Other concerns involve the chatter about higher taxes. But data illustrates that higher taxes are often only a short-term headwind for equity markets. It follows that there could be a bit more volatility in the second half of the year.
Growth stocks worth consideration at this point in time are: LPL, CTRN, SC, PCH, LPX, PATK, BZH, ABG, MT, PTR, SSL, MT, and HRI. For dividends and growth: GLP, AGPYY, ARI, KRP, KREF, and OMP. At present, the top performing ETFs are: XLI, VIS, and VBR. Good investing!
May 8: New stock price development.
As expected the just launched BIGZ has now come down to a price nearer to it’s NAV . . . and it continues to fall. When it gets below its NAV or $20.00, I’d buy some.
May 12: The inflation issue.
Stocks are reacting to inflation and selling off a bit because investors fear a change in Fed policy. But, this should not cause a change in FED policy because monetary and fiscal stimulus — increased money supply from buying debt and government debt financed spending– are demand-side policies. However, the noticeable inflation is on the supply-side of the economy. Only policies aimed at alleviating supply shortages and supply chain inefficiencies can reduce these problems. Fed tightening will not do anything to help with that.
In fact, it is possible that reducing debt purchases by the Fed will only make the problem worse by causing longer-term interest rates to rise even faster. This is because the government and the private sector would then be competing for a smaller amount of money to use for public (infrastructure and other spending) and private investment. The price of money, the interest rate on loans, would be pushed up faster This would reduce or squeeze out some private investment in those very things that might help to reduce private-sector supply-side problems.
Bottom line: We might find it is better to live with increased supply-side induced inflation for a while.
Political Quiz: The threat to our democracy caused by the previous administration is worth another quiz:
Question: Which of the following outcomes and policies did the Trump administration accomplish?
A. It was put in power through the help of Russia’s meddling in social media in order to do what V. Putin wanted — to reduce our global influence — and thus became Americas first “Put Russia First” administration.
B. Enacted protectionist trade barriers favored by many democrats and unions that led to trade retaliation by other countries and the Harley Davidson Motor Co. threatening to move its operations to Ireland so as to be behind the retaliatory trade barriers.
C. Re-negotiated NAFTA to favor democrats, unions, and blue-collar workers.
D. All of the above.
