Lifting Our Target for Stock Prices. The S&P 500 is up 27% from its Christmas Eve low, and 19.3% this calendar year through the close on Friday – not including dividends. Last December, our forecast for 2019 was 3,100. We’re just 3.7% away.
The Longest Economic Expansion. Ten years and a day. But just because it’s the longest doesn’t mean it’s the best…The story that should have held the spotlight these past ten years is entrepreneurs overcoming political obstacles to keep the US economy growing.
This Crazy Rate Cut. We think a rate cut is crazy. However, it makes our bullish case for stocks even easier to defend, in spite of the fact that we think the Fed would be sowing the seeds of future economic problems.
How Social Security Benefits are Calculated. Thank you to Libby Wells for asking me to be a guest contributor for her Bankrates.com article.
Better Economic Signs. None of this means the US economy will grow forever. It won’t. But too many analysts and investors are needlessly fearful of a recession starting soon. We don’t see one this year or in 2020. Beyond that, forecasts are merely guessing. Appetite for risk should improve from here. Smart investors should get in front of it.
No Need for Interest Rate Cuts. Instead, we think policymakers who are interested in promoting economic growth would be better served by turning the focus toward government spending.
The Plow Horse Economy Returns? We haven’t been worried about a trade conflict with China…However, we are more concerned about President Trump’s recent tariff threat toward Mexico…Using tariffs to achieve policy goals outside of foreign trade makes it much more difficult for international companies to plan ahead.
Foreign Slowness Not an Obstacle. Don’t panic if, and when, you hear of slow growth abroad. A large part of the reason is better policies in the US, which will help support growth here.
Don’t Count on a Rate Cut. The US economy is nowhere even close to needing one rate cut much less two. Nominal GDP – real GDP plus inflation – was up at a 3.8% annual rate in the first quarter, is up 5.1% from a year ago, and is up at a 4.8% annual rate in the past two years, all well above the federal funds rate of 2.375%.
Trade War Hysterics. Anyone can invent a scenario where some sort of Smoot-Hawley-like global trade war happens. Realistically, though, that appears very unlikely…In the end, China wants to trade with the West, not North Korea, Russia, and Venezuela. China needs the West. And all these trade war hysterics just aren’t warranted.