Perspectives

Lawrence Kudlow, President Trump's head economic advisor, coined the phrase, “Corporate profits are the mother’s milk of the stock market."  Without profits, stocks will not go up in value.  Corporate profits for Q2 have been coming in better than expected and should be leading the market higher. We believe current trade negations and the mid-term elections are currently weighing the market down. President Trump is pivoting away from trade spats with traditional US allies towards greate… View More

We wanted to bring you this news as it unfolds. We have noted that the Trump Administration is considering indexing capital gains taxes to inflation. Under the proposal Mnuchin has the legal authority to change the indexing of capital gains taxes from nominal terms to inflation-adjusted terms, without an act of Congress. The proposal would eliminate taxing inflationary capital gains by indexing that gain to inflation and taxing only the after-inflation gain. Estimates suggest that the tax chang… View More

Our view over the past four weeks was that the Trump Administration needed a win on trade (outside of China) to build support for larger escalation with China. This process is now in place. After weeks of rising trade tensions, the U.S. and EU meeting last week resulted in some rare positive trade-related news. It is unclear whether this marks a broader shift away from protectionism or is an isolated event. But at this point, the bar for positive surprises is so low that even news that negotiati… View More

We continue to believe that there is a disconnect between the strong US economy / robust corporate earnings and the wall-of-worry (trade, yield curve, debt levels, mid-term elections, etc.). Politics are trumping economics this midterm election year, but our base case remains intact: investors are underestimating the stimulative effects of fiscal stimulus and regulatory easing while overestimating the potential negative impacts of a trade war, a rotation (not a fade) in global growth is underwa… View More

The major indices, with the exception of the Russell 2000® Index, which has dominated markets for most of this year, closed higher last week even after a mid-week pullback following the announcement by the U.S. of an additional $200 billion worth of tariffs on Chinese goods in late August.  As of Friday, the Chinese government had not yet responded.  The equity markets rebounded strongly on Friday; for the week the Dow Jones Industrial Average led the indices with a 2.30% gain; the Nasdaq ros… View More

$800 billion The approximate value of stock that S&P 500 companies are on track to repurchase this year, which would eclipse 2007’s record buyback bonanza of $589.1 billion. Among the biggest buyers: Oracle, Bank of America and JPMorgan Chase. The historic spending spree isn't giving share prices the boost companies bargained for, and has some analysts worried that they're buying at excessive valuations during the peak of the economic cycle. Separately, business borrowing is picking up… View More

The US has officially imposed tariffs on $34 billion of imports from China, and China in response has imposed tariffs on $34 billion of US goods exported to China.  We want to share some of the relevant facts to put the tariffs in perspective. In 2017, total US imports were $2.9 trillion and total US exports were $2.35 trillion.  The $34 billion of tariffs equates to 1.2% of total US imports, and 1.4% of total US exports.  We think this is important because both the US and China are imposing… View More

Looking at Walgreens adjusted 2018 third quarter (Q3) earnings per share (EPS) of $1.53 and revenues of $34.33 billion (surpassing analysts’ expectations of $1.47 and revenues and $33.65 billion respectively), we are reminded of the importance for investors to control emotional responses. After beating on earnings, and raising its quarterly common dividend by 10% to $0.44 a share, along with announcing a new $10 billion share repurchase program, which is scheduled to be completed in the ne… View More

Investor Sentiment is less bullish but not yet bearish (7 on a scale of 10, with 10 being the most bullish). Europe has become strikingly out of favor over the last few months and Technology remains the preferred sector though optimism towards FAANG has moderated slightly. A majority of investors are betting on 2 more hikes this year and a year- end 10-year yield around 3%. Trade dominates the list of concerns and long USD is a widely held view.  The NASDAQ and Growth indices outperformanc… View More

At the beginning of every new year we look toward the future in anticipation of what it will bring, and for years we've shared Bob Doll's Top 10 Predictions because he tends to get over 70% of them correct every year.  As we begin the second half of the year, we wanted to share an update on how this year's predictions are working out.  Below is his mid-year scorecard.  The BLUE predictions are correct so far, and the RED predictions are too early to call yet.   So far, 2018 has been a … View More