July 23, 2018
I begin with a happy birthday wish to my (not so) little sister, Taylor… Have a great one, I love you!
It has been busy around the Elevate offices (and the world) since our last post. Trade wars seem to be intensifying daily with the "Tweeter in Chief" firing from the hip.
This morning, Iran has drawn the ire of Mr. Trump after its president warned about the "mother of all wars" over the weekend. For this reason, oil traders will be watching closely, their twitter feeds. A sign of the times...
Gone it seems, are the days of "synchronized global growth" which was the buzz-phrase of 2017, followed up perhaps by "animal spirits", both of which we are glad to be rid of from a daily vocabulary perspective, but we miss surely from percentage performance perspective. With the rising tide lifting all boats and the water being as calm as it had ever been (low VIX) nobody onboard so much as spilled a sip in 2017. In 2018, the wind and waves are picking up, but the tide is still rising.
The big question we are trying to answer now is whether or not this market has legs for one more big move up before the yield curve inverts and signals almost certain death of the bull. We mentioned the yield curve in our post on June 26th. Since then, this situation has deteriorated rapidly with the Federal Reserve continuing to posture for higher rates on the shortest maturities.
Last week, Mr. Trump expressed his displeasure with the actions of the Fed, which is highly irregular in recent history (for the President to address the Fed and/or its policies so publicly and so critically)… This has put Fed Chairman Powell in the position of having to choose between to undesirable scenarios.
1) continue to raise rates in the face of criticism from the President and likely face more public attacks, or
2) slow the pace of rate increases and face criticism from the entire world of economists for buckling under pressure and following orders instead of doing what he thinks is best for the economy.
This is not a surprise to anyone at Elevate as we pointed out to anyone who would listen, over and over, that Mr. Trump is a self-proclaimed "low-interest-rate-guy" and the "king-of-debt" who installed his own guy as the Chairman of the Federal Reserve Bank... No matter what we are seeing publicly, I submit that behind closed doors a strategy is at play and both of these men are on board. None of which is good or bad, in our view – just worth noting.
In other news, according to the Wall Street Journal Tesla Motors (TSLA) asked its suppliers for a refund in an effort to turn a profit. Elon Musk has no shortage of tricks up his sleeve... for now.
Oh... yeah... and it is also earnings season. According to FactSet "analysts currently project earnings growth to continue at about 20% through the remainder 2018. However, they predict lower growth in the first half of 2019. During the upcoming week, 174 S&P 500 companies (35%) are scheduled to report results for the second quarter." Get ready for a barn-burner!
As for our portfolios, we are raising cash when we hit our stops and putting cash to work in our best (new) ideas as opportunities present themselves. Business as usual.
Shane Fleury, CIO
Elevate Capital Advisors
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