Weekly Investment & Economic Talking Points
- Q1 GDP came it at a revised 1.4% – a solid number given that Q1 numbers tend to come it “lite”.
- YTD, International markets have performed well with the EAFE up 14.23% and Emerging Markets up 18.6%. By comparison the S&P 500 is up “only” 9.34%. All in all, a solid start to the year.
- Given that these numbers have been getting some press this weekend, and with Ron Paul coming out on CNBC yesterday saying he wouldn’t be surprised if stocks were 25% lower by October, we need to be aware that clients may be getting nervous.
- As you have all heard me say over and over, no one can predict a correction. By definition a correction is a 10% or more pullback in markets. These often happen without much of a warning but they also usually have a catalyst of some kind. In 2011 it was the debt ceiling and downgrade of US debt, in 2015 it was Chinese currency manipulation.
- Here is the key point…NEITHER of those corrections caused a recession. Corrections are not recessions. We track recessions by the LEI’s and the yield curve – neither of these indicators are flashing “recession” right now.
- Lastly, the inflation theme has stalled recently with some indicators not moving for several months. That doesn’t mean the story is over, as monetary policy is still “easy”, wages continue to increase, and unemployment inching to all-time lows. Stay tuned…
Earnings season starts again this week. We will not only be looking at bottom line (profit) numbers but also top line (revenue) and forecasts. Sometimes the top line and forecasts are more important than last quarters profits, and with all of the uncertainty coming out of Washington these will be important to analyze.