Many thought when Donald Trump became US president markets would react badly. How wrong was that?
Tax cuts and de-regulation have provided a boost to markets. However trade policy has also provided uncertainty. Rising interest rates, often not good for equities, have been seemingly offset, so far, by low unemployment and inflation and rising corporate profits.
With the most recent events in Washington, including Trump’s out-of-left-field tweet announcing an immediate troop withdrawal in Syria, followed by resignations by Defence Secretary Mattis and US anti-ISIS Envoy McGurk, Trump asking if he can fire Fed Chairman Powell, Trump associates being indicted and convicted by Mueller and other prosecutors, the Trump foundation closure due to inappropriate use of funds, the government shutdown that Trump said he would be proud of, Treasury Secretary Mnuchin’s calls today to top banks to check on their liquidity (was that even a problem?), to name a few, may mark a tipping point where the unpredictable deeds of Trump and his administration start to affect consumer and business confidence as well as market sentiment.
Investors have to be scratching their heads and wondering where all this is going and how much damage the seeming chaos might bring. 2019 doesn’t look like it will get much better with unresolved trade issues with China and others, the ongoing Mueller investigation and with the Democrats taking a majority role in the House of Representatives, where they will have the power of subpoena to conduct ever more investigations into Trump et. al. No one knows what tweet will next emanate from Trump’s fingers.
Powell is signalling a slowing of interest rate increases for next year. That might help markets settle. But forecasted profit growth is also slowing for 2019, same for global growth. Trump’s erratic behaviour seems to be amplifying uncertainty.
I can’t help thinking 2019 will be more volatile than 2018 as the drama, or do I say crisis, south of the border plays out.
We certainly live in interesting times.
Update: The Washington Post has a piece about how investor expectations may be adjusting to the reality of a Trump presidency.
The presentation from Kah-Ming Soh on understanding the stock market profile is now posted here.
Geoffrey’s slides on making a fantasy portfolio trade are posted here.
I’ve posted the deck on hedging and the deck on the Q3 2018 OSC fantasy portfolio reviews on the Ottawa Share Club members page here.
I’ve posted by September 2018 quarterly portfolio review. We’re behind on our total return target so far this year. Find our more here.
Brad has made some updates to Steven Brown’s Retirement Forecaster Excel spreadsheet tool (version 2.7.3).
The changes he’s made are improved accuracy with the calculations for CPP Survivor Benefits and CPP Death Benefit.
See Brad’s member page here for more..
I’ve updated our household investment plan to reflect further progress on my thinking as we move closer to retirement.
I made pretty much all the trades I had discussed previously in my self-imposed quarterly trading window. One new addition to the portfolio (BIP) and two eliminations (EFV, EEM).