The Conference Board Employment Trends Index (ETI) Declined in December

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Updated: Monday, January 12, 2026

The Conference Board Employment Trends Index (ETI) declined in December to 104.27, from a downwardly revised 104.64 in November. The Employment Trends Index is a leading composite index for payroll employment. When the Index increases, employment is likely to grow as well, and vice versa. Turning points in the Index indicate that a change in the trend of job gains or losses is about to occur in the coming months.

“The ETI slid further in December, reflecting low labor market confidence in the outlooks for hiring and job-finding,” said Mitchell Barnes, Economist at The Conference Board.

On top of this, Trump added tariffs to pressure some European countries over Greenland. This is like shooting US growth in the foot because it will only add to the headwinds slowing economic growth and labor market hiring. To be clear, we are not yet in a stagflationary recession but in more of an economic slowdown or “mild stagnation.” Inflation may get help from productivity increases in AI and stable oil prices, but this effect will be offset by supply disruptions and cost increases for consumers and producers that result from more tariffs. Also, health care costs are on the increase and will show up in inflation indexes as well. Thus, the stagflation monster is thinking about huffing and puffing at the door while Trump’s better jobs and higher wages have long disappeared from reality.

Within this context I have a few decent stocks and funds to recommend, while at the same time recommending caution and the accumulation of savings to be used during a possible market sell-off. For growth consider: F, PROP, SWKS, AAUC, HTH, ARMN, ADEI, EVER, NXGPY, ANGO, BDTX, TKAMY, FIVN, SKWD, DG, ARRY, TX, AUGO, ARTC, CGAU, KGC, REVG, ILPT, GM and TRUP. For dividends and growth: BNPQY, CRRFY, SUN, F, PAA, TIMB, CTO, MBGYY and SWKS. During the previous three months the ETFs with the highest growth rates were: PSI, SOXX, SOXQ, SMH and KBE.

For those interested in CEFs for income and portfolio growth there are two main categories. For taxable investment portfolios consider: ETB, ETV, ETW, EVT, BXMY, DIAX, QQQX, HTD, PDT, PML and FLC. For tax sheltered portfolios such as 401Ks that are subject to RMDs consider: BTX, BST, BSTZ, NBXG, RLTY, JRS, PGZ, DFG, ZTR, MEGI, HQH, HQL, BME, BMEZ, ECF, BCV, NCV and NCZ. Keep in mind that CEFs tend to preserve there NAVs and will lower their dividends during a recession in order to do so. Also, the market price of a fund can differ from its NAV. All funds suggested are priced at a discount to their NAVs and may tend to increase in value as a result. As always, good investing!

The post January Stock and Fund Picks first appeared on MarchéEconomics.

Trump only offers bad things for our economy. Everyone knows, since the last half of Trump’s first administration, that tariffs are his only policy. Moreover, tariffs only do harm. Thus, the more recent announcements of new tariffs have caused the stock market to plunge. Trump then chickens out and announces the tariffs are now off. The stock market then rallies. This is called the “TACO” or Trump always chickens out trade. There is no long-run growth or stability that can be expected. Since Trump only has tariffs as a policy for the economy there is no end in sight. There is no basis for stock investments in this environment. Just park your stock market money in a money market account and wait for a fundamental change in economic policy. If you are holding a portfolio of CEFs then continue to do so. My portfolio has sold off and then recovered somewhat. The dividends seem relatively safe but some funds like XFLT and EIC have reduced their dividends due to economic weakness and uncertainty. That is how CEFs maintain their NAVs and stay afloat. Ultimately, once Trump is gone, things will recover.

The post May Stock and Fund Picks first appeared on MarchéEconomics.

The October sell-off has created opportunities for stock pickers.  On the other hand, Friday’s hot inflation read means the market is now sure of a Dec. Fed rate hike.  As Warren Buffet warns,  “Interest rates are like gravity to stocks.”  A more mechanical rationale for this phenomenon is that the higher the interest rate the higher is the discount rate on expected future earnings for stocks.  This simply lowers their present values.

If you’re cautious like me, simply hold cash or near cash funds that pay a dividend tied to short-term interest rates.  Cash isn’t going to change its value much, if at all.  The dividends, however, will increase along with Fed rate hikes.  This will also tend to increase the value of these funds over time.  For example, you can hold JPST, ICSH, USFR, and FLOT and be safe given the markets increased volatility.  Moreover, a severe sell-off leaves you holding money that you can then convert into opportunities in much lower stock prices.

In the meantime, some growth stocks you might want to consider are ARC, CRC, MOS, and USAK.  Growth oriented ETFs to look at include JJOFF, BJO, HDV, XLV, IHI, DGRO, and MGV.  Two good dividend growth stocks are AUO and MCY.  Good investing!

Week 2 (Nov. 12 – 16):

When you don’t like the market, be defensive.  In other words, making money requires positioning for the prospect of belter opportunities.  I am holding only ICSH, JPST, and FLRN.  If the market improves and doesn’t crash I will look at SPHD, PEY, and BST.  The main problem is that tariffs will drive the global economy into a recession and take the US with it.  The Fed can only accelerate this process by raising interest rates too fast.  They probably won’t though as they are aware of the global economic slowdown caused by tariffs.  However, failing to raise rates as expected will send a bad signal to the markets.  A crash might follow.  If you expect a crash, be in cash!  Good investing!

Week 3 (Nov. 19 – 23):

The market will either get better, get worse, or stay the same.  To end getting worse, there must be large volume and disorganized or panic driven sell-off.  Until then you must wait by holding cash in the form of ICSH, FLRN, JPST, USFR, and TFLO.  The Fed looks only at the economy to see if tightening and unloading its balance sheet assets continue to make sense.  To the stock market it looks like the Fed is taking the punch bowl away from market partiers.  That’s why you continue to hear from brokers things like, “. . . the Fed knows nothing!”  I’d ignore that.  The Fed must dampen inflation expectations by being a bit overly aggressive, not invert the yield curve, and sell its financial assets to keep the economy from overheating in the short-run.  It’s only the short-run that it can manage. So ignore that noise about the Fed.

The real problem is that Trump’s tariff policies are probably going to cause a global recession from which the US can not escape.  Dealing with the Chinese is required, but be done differently so as not to adversely effect our main trading partners in the EU.  Having the Congress take away  Chinese most favored nation (MFN) status would be a better strategy.  Prohibiting our companies from engaging in joint venters with the Chinese would be another.  Incentivizing companies to move their international operations to countries other than China is yet another strategy.  One could go on but you get the point.

If you want to consider a short-run growth stock try CONN.  Another thing to consider is the iShares Evolved Health care staples ETF which uses the symbol IEHS.  Otherwise, hold cash.  In the long-run, interest rates may continue an upward trend as the Federal budget will soon be comprised of only nondiscretionary entitlement expenditures such as Social Security.  All discretionary expenditures such as military funding will then require additional borrowing.  If a socialist is elected president, then there will be even more discretionary expenditures associated with government income redistribution that will require even more borrowing.  Moreover, the supply side of our economy will be destroyed and this represents our tax base.

This will put us in a situation like Greece.  Already, our gross national debt is above 100% of our economy’s GDP.  Before Obama, it was only 50%.  Naturally, Obama’s Keynesian fiscal stimulus expenditures not only failed to pay themselves back, they made everything worse.  Because of the rise of socialists, this situation is more likely to repeat itself than not.  Thus, you might want to just hold cash forever.  On the other hand, if the stock market gets low enough opportunities may once again appear.  Until then, good investing!

Week 4 (Nov. 26 – 30):

The Fed has softened up and considers the secular decline in the neutral discount and Federal funds rate targets as near.  That leaves the problem of trade protectionism of the Trump administration as the remaining headwind and major global problem.  Markets are on edge as the G-20 summit begins.  If China and the US have a more or less pleasant meeting, then the market should react positively.  Still, don’t expect a deal.  Eventually, trade protectionism that continues  will lead to a world-wide economic collapse.  Already the negative effects of employment loss in export industries and higher production and consumer costs (inflation) are showing up in the US.  Things can get much worse as continued protectionism will simply support a continuation of this trend.

In the meantime, those that want to be in the market might look at TITN and ABG as potential growth stocks to add.  A good dividend paying ETF is HDV.  Some defensive oriented ETFs that pay monthly are SPHD and PEY.  I also like JRO, DHS, and PDT for dividends and growth.   Three good dividend growth stocks are VLO, MO, and T.    A defensive but growth oriented ETF is IEHS.  The preferred stock LDP is now at a substantial discount to NAV and pays over 8%.  I would continue to hold cash or near cash funds like TFLO, JPST, ICSH, and USFR as the largest part of your portfolio.  These will reduce portfolio volatility and produce monthly dividends.  Good investing!

The post November Stock and Fund Picks first appeared on MarchéEconomics.

If Pres. Trump makes a trade deal to reduce tariffs (taxes on imports) it will be pro supply side along with the earlier tax cuts and deregulation.  If he stays protectionist, economic growth will slow, both domestically and globally.  The later problem may even lead to a recession.  Within that context of uncertainty, I’ll recommend the following growth stocks:  AY, GLNCY, GBX, MRO, NCS, CIVI, and CONN.  Strong dividend growth comes with GLNCY.  Also, EQIX offers strong dividend growth although it is relatively expensive.  Strong ETFs for long-run growth are RZG, JSML, and PSCH.  Good Investing!

Week 2 (July 9 – 13):

In the U.S., markets seem to have priced in the negative effects of the trade war versus the positive effects of earnings and economic growth.  This means that the overall market will end the year about where it is now.  Stock picking is even more important as only a handful of “other than average” stocks will handily beat the market.  For growth, consider ORN.  For dividend growth consider BHR, CQH, CNXM, and CLNY.  The best growth oriented ETFs include FDN, PSCH, and PNQI.  Good investing!

The post Free Market Beating Stock Picks for July first appeared on MarchéEconomics.

The economy is just right.  Short-term calm and low volatility usually create a “smart-money” outflow and a short-term dip that you should buy . . . maybe by tomorrow.  Consider the growth stocks GTES, and OFG.  Look at the ETFs:  XLI, PSCI, and XSD.   Good dividend growth stocks are CVRR, STX, HCLP and TRTN.  No one can predict the future or the next recession so all attempts to do so are merely noise.  Trump’s anti supply side trade policy will probably be the culprit for any economic slowdown or recession.  It is a job and growth killer and will eventually offset the supply side boosters of deregulation and tax cuts.  Just when that will occur is anybody’s guess.  Good Investing!

Week 2 (June 11 – 15):

The Fed raises the expected GDP growth rate and becomes more hawkish in terms of adding one more interest rate hike to the previous three it planned for the year.  Between the Fed getting ready for the next recession by raising short-term rates (the discount rate directly and the federal funds rate target rate range) and Trump trade tactics that may or may not produce results, the seeds are being sown that will lead to a recession, but one that is most likely far, far down the road.  With an unlikely near term recession as the background assumption, I’d consider growth stocks such as:  CVX, CVTI, SIM, MKSI, TALO, and TOELY.  Good dividend growth stocks include M, GIS, LYB, BXM, RMP, NEW, BGS, TRTN, and especially T.  Thanks to the reduced North Korean nuclear risk, an ETF you might want to consider is FKO.  Good investing!

Week 3 (June 18 – 22):

Trump trade tactics v everything else = increased volatility appears the theme.  Personally, I’d like to pull all our companies out of China before the steal all our technology.  Their command economy government doesn’t yet realize the extent of their unfair trade practices even though we have given them most favored nation status (MFN) in trade which eliminates trade barriers in exchange for an implied agreement that the Chinese behave like good trading partners.  Time for Congress to rescind MFN to the Chinese.  Trade talk still isn’t tough enough to get through to them.  Thus, this must continue and even escalate.  At some point the stock market will get used to it and simply price it in.

For growth, consider the stocks APC and DIOD.  APC also pays a dividend.  Dividend growth stocks to consider include BSM, CQH, CLNS, and NEE.  Strong growth ETFs are PSCH, FDN, FYC, and BTEC.  The best mutual funds are KSCOX and TEFQX.  Mutual funds require a substantial initial investment but ETFs do not.  Good investing!

Week 4 (June 25 – 29):

Traders that overreacted on Monday created opportunities for those with diversified portfolios  cash on hand.  This is likely to occur again so be ready.  I’d also have some TZA in my portfolio as a hedge.  In the meantime consider DLPH, PGR, ARCB, and ADBE for growth.  ETFs to take a look at include IHI, IGM, and FTEC.  Mutual funds are FBSOX and HCEGX.  Let us hope that June ends well.  Good investing!

The post Free Stock Picks for June 2018 first appeared on MarchéEconomics.

Adjustment from April:  I recommended an Argentine utility company EDN that is very profitable and growing more so over time.  However, the Argentine currency problem continues to worsen which creates a currency translation problem for EDN.  Eventually, EDN will become very cheap and a great buy, but may continue to fall in value due to the weakening Argentine Peso in the nearer term.  Either get out of any position you have now and wait until the Peso stabilizes before going back in or wait to start a position in the future when EDN is a better buy.

Week 2 (May 7 – 11):

Money is coming back in.  The bull is once again ready to resume its run.  Buy JLL, GHDX, QNST, and CVRR as growth stocks.  CVRR is also a dividend growth stock.  Buy the ETF FTXL, but be ready for some volatility.  The best mutual fund is SMPSX.  I also have bught a little TVIX for assurance against future volatility as it is down into the $5’s.  Good Investing!

Week 3 (May 14 – 18):

The market seems to wake up and eat Korean fish snacks every morning for breakfast.  But then, after realizing it’s mistake, it recovers.  I’ll call that the state of the market for now.  Luckily, all things wear out:  Strong and steady gains, turn to a sell-off.  A sell-off turns to Korean fish snacks and volatility.  Korean fish snacks and volatility then turn into another leg up . . . eventually?  Be prepared.  That said, consider the ETF for small cap industrials PSCI.  Then consider the dividend growth stock PGR.  For a mutual fund, consider FKCSX for small cap growth.  If you want dividends and potential growth there is insider buying in GHY, which seems like a bet on interest rates going up.  Good investing!

Week 4 May (May 21 – 31):

I wanted to let market volatility play out a bit before making recommendations for this last period in May.  Buying the current dip should pay off.  Dividend growth stocks are AYR, BP, TEGP, and NRZ.  A good growth stock is HFC.  The ETF for growth is XLY.  The best mutual fund is TEFQX.  High yield junk bond funds and preferred CEFs have net asset values that move in the opposit direction of interest rates, just like with bonds.  At some point, interest rates will likely continue to increase which makes these funds risky.  With the exception of maybe BIT, I’d avoid those.  Good investing!

The post May Market Beating Stock and Fund Picks first appeared on MarchéEconomics.

Headwinds from trade wars are on the way.  This, as indicated in the February Stock State, is our biggest stock market worry.

Why are tariffs on steal and aluminum such a problem?  Trade theory, not stock market talking heads, is the answer.  Tariffs on specific commodities imposed by a large nation such as the US will effect the global price by reducing demand from a large (the US) importer.  This hurts all steal and aluminum manufacturers in the rest of the world and will lead directly to retaliation.  This starts a trade war.  I would not invest in the market in 1929 when the Smoot Hawley trade act had its worst effect.  International trade contracted by about 2/3s.  All trade related jobs (manufacturing, farming, transportation, shipping, inventory, etc.) were lost.  Export markets disappeared and caused farm production prices to plummet.  Farmers went broke.  A global recession ensued.

Market strategy is to go 100% to cash and wait until the consequences of the coming trade war are over.  You can play with the TVIX, for example, with your cash.  Wait for the TVIX to fall, buy some, and then sell it when it goes up, and then repeat.  That’s the only safe thing to do at this time.  I would normally say good investing, but that is no longer possible.  Good luck!

Marche 4 update:  

Presidents do good and bad things.  For example, Bill Clinton was a pro trader.  That, and the luck of low oil prices and computer technology adoption into work places that increased productivity provided supply side effects that overwhelmed Clinton’s higher taxes, military spending cuts, and Congressional social program cuts.  In effect, contractionary fiscal policy became overwhelmed by positive supply side effects.  Good or lucky aside, Clinton went on to restrict CIA recruiting and eliminated SEC oversight of derivatives.  These policies contributed to 911 and the Great Recession.

Obama attacked the economy while at the same time trying to stimulate it with deficit financed fiscal spending.  The weakest recovery on record occurred, along with a doubling of the US level of public debt.  In other words, before Obama, the US had about a 50% level of public debt to GDP and after Obama The US public debt to GDP ratio jumped to over 105%.  On the other hand, we did get Obama care.

President Trump is no different.  Cuts in Obama’s overregulation and corporate tax cuts are tremendous supply side effects that are good for the economy.  Moreover, expanding the tax base through economic growth will reduce the negative effects on public debt.  By contrast, recent protectionist trade policies are a huge and contradictory offset, mush like the contradictory macroeconomic policies of Obama.  Trump’s trade policies will cost jobs and economic growth even if there is no retaliation.  Users of steel and aluminum now face higher costs which contracts output and reduces employment.  Higher costs are then passed on to consumers.  The total cost to consumers averages about 10 times the value of any jobs saved in the protected steel and aluminum industries, causing the US to lose wealth, growth, and employment.  Worse, trading partners that previously sold steel and aluminum to the US have lost demand from a large importer and will face lower global prices as a result.  They will surely retaliate by imposing tariffs on our exports.

The World Trade Organization (WTO) oversees and enforces all international trade agreements and will soon rule on the legality of the steel and aluminum tariffs.  Most likely they will rule them illegal.  But, if they do Trump, as an isolationist, he may pull the US out of the WTO.  That will undermine the WTO’s credibility and its authority to oversee international trade agreements.  The world trading order may then unravel.  Trade agreements would become unenforceable and many nations may follow the US example of imposing tariffs on imports.  Soon no one will import (i.e., mercantilism where everyone wants only to export and have a trade surplus) and no trade will occur.  The world will then spiral into a deep recession.  Only a reversal of trade policy back to free and open trade will lead to recovery.

In the short-run, it is difficult to predict how markets or our trading partners will react.  Markets may settle down for a while before there is another round of volatility and sell-offs, or a bigger sell-off triggered by more immediate trading partner retaliation will occur.  Already, the agribusiness sector looks shaky.  Only time will tell.  One must prepare for any and all possibilities.  Trade theory prediction will be more accurate in the long run, but many scenarios are possible.  Even if the WTO rules in Trump’s favor, for example, other nations may sill follow the US example and impose trade restrictions of their own.  Time will tell how the dominos fall, but fall they will.

The post March 2018 Stock State first appeared on MarchéEconomics.

The correction or pull-back of about 10% is running its course.  Much of the attention focused on headwinds created by higher interest rates (as the 10 year government bond heads for 2.9% is an overstated concern.  Imagine you are flying a small airplane into a headwind.  The FED has helped you (the stock market) fly faster by buying government bonds (and other dept) to keep interest rates lower.  This builds up the FEDs balance sheet.  Unwinding the balance sheet puts downward pressure on stock valuations and increases short-term interest rates.  This tends to also cause longer term rates to go higher, but more on the basis of expected growth rate increases and inflation.  The higher interest rates in turn, increase the headwinds for your airplane (stock market) making it fly slower.  Thus, the sell-off.

This type of “fiscal-drag” is not likely to become severe.  Our interest rates are greater than those in many other countries and the dollar has stabilized or even increased in value.  From a foreigner’s point of view, a higher dollar value plus higher US interest rates make for an attractive investment.  As foreign investment flows into the US it does two things:  1) It reduces our interest rates because foreigners are now playing the role of an accommodative FED by buying up our bonds.  2) It keeps the dollar from falling too much, or it causes it to increase in value.  This increases the return to foreign bond purchasers and attracts even more portfolio capital into the US.  In other words, the reduction in headwinds is due to foreign portfolio capital inflows.  This allows our small airplane (stock market) to continue flying faster.

Problems of increased headwinds are actually elsewhere.  Increased deficit financing for government infrastructure expenditure is a potential headwind increase because the increased supply of bonds will increase domestic demand for savings and thereby increase market interest rates even more.  Still, this would only attract more foreign savings in the form of portfolio capital inflows from foreign sources and offset interest rate headwinds.  Bigger problems are potential trade wars that lead to retaliation, reduced exports, and net job losses.  Trade restrictions also result in a loss of welfare to consumers through higher prices.  Moreover, losses of consumer welfare are always much greater (by a factor of 10 or more) relative to the value of the few jobs saved through trade protections.  Hurting the consumer and reducing national income will also hurt the overall economy and become a threat to economic growth.  This is the biggest head wind to worry about.  Luckily, offsetting this recessionary head wind s the supply side stimuluses of the tax cut and deregulation policies.

While it is a case of reading the macroeconomic tea leaves in order to interpret future economic growth and earnings potential, it seems that the balance of weight comes down on the side of continued bull-market forces without too much in the way of interest rate or other heads winds slowing down the stock market.

The post February 2018 Stock State first appeared on MarchéEconomics.

Bond sector money flows are one way to see how this might happen.  As the FED sells bonds to reduce its balance sheet and increase short-term interest rates, the value of unmatured bonds will decrease.  This is because the value of a bond varies inversely with the market interest rate for those bonds.  Moreover, either the interest rate can change and cause the value of bonds to change in the opposite direction of the interest rate change or the value of the bond can change and cause interest rates to change in the opposite direction..

An example of an interest rate change that causes an inverse change in bond values is as follows.  If you have a $1000 bond that never matures and pays a stated or fixed return of $50 per year, the corresponding market interest rate must equal 5%.  This gives $50/.05 = $1000.  Only the stated return of $50 is a constant value.  Both the $1000 bond value and the market interest rate of 5% are inversely related variables.  By contrast, if the market interest rate climbed to 10%, this same unmatured bond would now be worth $50/.10 = $500 in the open market.

This process is underway at the FED.  Specifically, as the FED sells bonds to decrease their value and thereby drive up interest rates we can expect people to sell unmatured bonds to avoid the expected capital losses.  The bond market is huge in that it is about twice the size of the market for stocks.  Cash from bond sales must go somewhere and most of it will go into stocks and drive the price of stocks higher.  At some point, on the other hand, those holding stocks will see higher rates on less risky bonds as a better alternative and the money that flowed into stocks will reverse and  flow back into the now higher yielding bonds.  This will look like what happened during the stock market crash in 1987.  The crash may cause a sudden V-shaped sell-off as in 1987 in which stock buying followed the sell-off.  On the other hand, it may cause a recession so that the stock market has a flat, bear market bottom.

One way to prevent the FED from causing a sudden and severe stock market sell-off from its activist monetary policy is to require the FED to follow a monetary rule that will maintain a so-called “neutral” short-term interest rate.  Such a rule might be related to the difference between a target inflation rate such as 2% and the actual inflation rate and the difference between a full employment GDP growth rate and the actual growth rate.  This is the Taylor rule.  If, for example, the actual inflation and GDP growth rates are above their respective target rates the FED would be required to sell bonds and cause an increase in short-term rates.  If, on the other hand, actual inflation and GDP growth rates are below their target rates then the FED would buy bonds to increase their value and thereby decrease short-term interest rates.  In both cases, it follows the monetary rule rather than to act with discretion.  Having the FED follow a monetary rule means that the state of the economy determines FED actions.  without the rule, FED actions tend to involve attempts to actively manage the economy based on the whims, fancies, assumptions, political influences, attitudes, or beliefs of the FED chief and board of governors.

As long we the economy is not characterized by stagflation in which the actual inflation rate is above target and the actual GDP growth rate is below target, the Taylor rule will work as guide to FED actions.  In a period of stagflation any monetary or fiscal expenditure stimulus aimed exclusively at the expenditure or aggregate demand side of the economy will fail because only an increase in inflation will occur.  Instead, policies with predominant effects on the supply or production side of the economy are effective because they increast the GDP growth rate and reduce inflation.  Such policies may include tax cuts, but policies such as reducing regulations that, in turn, reduce production costs and incentives for greater private investment that increase productivity, which also lowers production costs,are effective.

Fiscal expenditures on public infrastructure investment also increase productivity and lower production costs.  While the short-run effects on aggregate demand are inflationary, the longer-run effects are on the supply-side of the economy through increased productivity and lowered production costs put downward pressure on inflation while simultaneously stimulating  production and GDP growth.

The post Activist Monetary Policy Conundrum first appeared on MarchéEconomics.

In the near term, the January 19th government funding issues looms as a potential road bump that may increase volatility.  Trump has the Democrats in a tight spot in that they want DACA and will only get it if they agree to fund the border Wall.  Don’t expect that to go smoothly.

This tax cut, like the Kennedy tax cut and Reagan tax cut in the early 1980s will have longer lasting supply side effects than the deficit financed fiscal expenditures under Bush and Obama that occurred on the basis of Keynesianism.  Obama doubled the national debt but didn’t get any significant economic growth to show for it.  This is because he tried to kill what he tried to stimulate.  Regardless of the misguided Obama, Keynesian fiscal stimulus multipliers have only short-run effects because multipliers go quickly to zero and the expenditures never increase economic activity enough to pay for themselves.  On the other hand, supply side policies are not limited to tax cuts..  The more recent regulatory reductions reduce costs, increase market opportunities, and have long-lasting supply side effects.  They may also be a larger and more long-lasting effect than the tax cuts.  Thus, it could be that the market is actually underestimating the supply side stimulus effects of the Trump agenda.  Any infrastructure expenditure will also increase productivity and have long-lasting supply side effects as well (along with the usual short-run expenditure effects). Unfortunately, the Obama debt build up to greater than 100% of our GDP limits the likelihood of any such expenditure making its way through congress.

On the negative side.  Bull markets will come to an end if there is greater than a 20% sell-off.  The best way to protect your portfolio is to increase the percentage of cash you hold or go completely to cash before it happens.  Short of such a big correction, any sell-off within the context of a bull market will be smaller and have a V bottom implying it is short-lived.  Those you can ride out.  All indications are that you can, if you have cash, buy these dips until it is time to get out of the market entirely.  I’ll let you know when I see that time approaching . . . possibly by this Spring or Summer.

January 23 update:

GDP growth is about to double that of the previous administration and we now have an actual economic recovery and expansionary business cycle phase for the first time in 10 years.  Basically we have switched from a monetary stimulus bubble in the stock market caused by contradictory macroeconomic policies.  These are an expansionary expenditure side policies (fiscal and monetary stimulus) versus contractionary supply side policies (i.e., regulatory overreach) under Obama that led to money growing into bank reserves and the stock market but not to loans and  investment.  Under Trump we now have consistent stimulative policies on both the expenditure and supply sides of the economy that create a real expansion that includes private sector investment rather than merely a stock market bubble.  In other words, the tax cut plan will have a short-lived multiplier effect on the expenditure side of our economy and a longer run supply side effect through greater investment, growth, and jobs.  Coupled with decreased regulatory compliance costs, another long-run supply side effect, the implication is to put cash to work.   Continue to buy the dips. 

The post January 2018 Stock State first appeared on MarchéEconomics.