Expect the market to have short rallies like we just had and then another bounce off of a short-term bottom. Some bottoms may be lower than previous bottoms. Eventually, things will get better and that is exactly when market sentiment will hit the bottom along with the overall market.

Already, new Covid-19 cases in Italy have leveled off to a constant rate, as opposed to an increasing rate. In other words, the first derivative is now equal to zero, if the second derivative becomes negative then we will truly have a reason for better expectations regarding the course of this once in a century pandemic.

Interestingly, the event caused recession that was at first a negative supply-side shock has manifest an extreme negative demand-side shock to the macroeconomy. The strength of the demand-side shock is so strong it has created a bit of a temporary Phillip’s curve phenomena of increasing unemployment and decreasing inflation. This justifies the strong Monetary and Fiscal stimuluses that recently went into effect. Unfortunately, it is doubtful that unemployment rates will decrease and inflation increase as a result of the economic stimulus. Medical technology will advance, and along with containment of the virus’s spread, will eventually put an end to the problem. In the meantime, Good Investing is Not investing any cash reserves at all!

April 17 Update:

The S & P probably bottomed in late March. The recovery will be like slogging through a marsh or bog and will take a very, very long time to get anywhere. The stock market will get ahead of itself at times and have to pull back and re-adjust. Only buy small amounts of funds or stocks on pull backs and be prepared to a long, long slog. Growth stocks to consider are: FRTA, TAC, PRAA, and PHI. Divided growth stocks are: PHI, BG, RGP, ACO, DIN, and TIGO and the best ETFs are QQQ, and XNTK. The best opportunity out there at the moment is O at around $50.00. Really good income funds include SPHD, PEY, O, BBN, GBAB, FLC, FFC, EXD, ETJ, BDJ, CII, BST, RNP, and RQI. Allowing the funds and stock you buy to DRIP or re-invest their dividends will pay off the most in the long-run. Good investing!

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

These examples of negative consequences are analogues to those resulting from Pres. Trump’s Trade war. The only benefit is to keep China from stealing our technology. The downside is that trade protections promote domestic monopolies such as the UAW. The UAW single handedly caused the bankruptcy of two major US automobile manufacturers during the Great Depression and caused the entire city of Detroit to collapse economically. Free trade, on the other hand, erodes the power of monopoly sellers such as the UAW. Thus, NAFTA was a better trade policy than the USMCA negotiated by Donald Trump. USMCA simply bolsters the UAWs monopoly power. Trump’s trade protections have also caused an increase in trucking bankruptcies, decreased nternational shipping, and increased the hardship among dockworkers because of the reduction of exports and imports. Industrial production, investment in building and equipment, and GDP growth are also down significantly. Moreover, the FEDs balance sheet is once again increasing. Only consumers and the labor market appear to be doing well. Unfortunately, as indicated in my previous post, this is due only to the increased inefficiency brought about by the reduction of international specialization on the basis of comparative advantage and free trade.

In spite of the negatives, Pres. Trump is now forced to propel the stock market upwards because of the election cycle. This should mean the opposite of the trade war escalation of 2018 that punished the economy and the stock market. So long as trade tensions are reduced, the economy will not slip into a recession. I don’t believe that Trump will negotiate a much better trade deal with China, however. His initial trade agreement is rather weak as it gives up specific tariffs for ambiguous and unenforceable promises. I expect that the Chinese will appear cooperative at first but there is zero basis for trusting them. Instead of tariff protections and a trade war that results in the inefficiency of protectionism, the better policy would be to place capital export restrictions and disincentives upon investment and production inside China. These could be coupled with incentives for capital export and production in friendlier countries such as Mexico. Unfortunately, the Trump administration doesn’t see the benefit of economic development in Mexico that would reduce illegal migration by capitalizing on Mexico’s comparative advantage from highly productive and cheaper labor. Instead, Pres. Trump only recognizes the apparent yet illusory gains from protectionism and greater inefficiency.

Given that the risk of recession for the foreseeable future remains low (as does the outlook for beneficial presidential policies or agreements) some highly ranked stocks that are expected to deliver growth for the next 30 – 90 days include: IMPUY, SEM, BERY, LAD, ABG. EVRI. PPC, and ATSG. Dividend growth stocks for this same period include: BMA, MBT, PHI, BBBY, DTEGY, LM, PDCO, SWM, TX, ABBV, OPI, and VGR. Currently, the best performing ETFs are XLK, XLI, and XLP. Keep in mind that the likelihood of a sudden stock correction from the current overbought level remain high. Otherwise, I wish you Good investing!

The post January 2020 Stock and Fund Picks first appeared on MarchéEconomics.

Looks like things have decided to cool off and things are relatively stable. Trump and the Chinese can still cause a major disruption so be prepared. Since you can’t know when things might change and it is political rather than fundamental it is probably best to plan on holding through any disruption. That said, panic selling is always a buying opportunity so I’d have some cash on hand.

Stocks to look at for growth are JLL, CBRE, and CIGI. ETFs are BBH, FCOM, and OUSA. Dividend growth stocks to consider include AVH, RIO, WPP, and ASRT. Expect TLRY to soundly beat its expected earnings on 3/18/19. Good investing!

Weeks 2 – 3:

The yield curve inversion is not that big of a deal . . . but we always explain it away and then have a recession.  Generally, when short rates are greater than longer rates, it indicates a slowdown in economic growth because longer rates increase only if private sector investment borrowing coupled with inflation are increasing because of accelerating economic growth.  The US is slowing down a bit, but the economy remains on good footing.  It is global growth that is feeding back into the yield curve.  Our rates are simply higher and international capital flows are about ten times those of trade flows.  Foreign money flows in to buy US treasury bonds when foriegn rates fall, as they are now.  This bids up the dollar, which is relatively strong, along with bond prices.  This, in turn, decreases bond yields and explains a lot of the yield curve inversion.  Trump’s trade policies are at the heart of the global slowdown and will eventually lead to a recession in the US unless a deal with China is reached and trade isolationism ends before that happens.  Trump’s trade policies are also why the Fed cannot continue to reduce its balance sheet and prepare for the next recession.  A socialist in the White house would then want to use Keynsian fiscal policy to bury us for good in a insurmountable level of government debt. We would then be at the mercy of the IMF for access to credit (foreign capital inflows would dry up due to the lower credit rating).  We would be put on austerity measures (very high taxes) because of IMF conditionality requirements.  As with Greece we would expect to spend eternity digging our way out of the mess.

Now that the long-run path to austerity measures is laid down, lets consider the next 12 to 30 months.  The band will still be playing party music on the deck of the titanic and the markets should be going up. Consider the growth stocks IIPR, CAPL, CRMT, XLNX, AVX, and AVID.  ETFs that look strong are PSJ, XSW, and PXMG.  Dividend growth stocks are EQM and BGCP.  Good investing!     

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