In my humble opinion, the best-titled financial newsletter around is called “Things That Make You Go Hmmm” Lately, that catchy title has been banging around in my head. Let me just list the reasons, in no particular order of importance.
The Federal Reserve is openly talking about cutting interest rates after finally getting them up to a whopping 2% or so! Even more astonishing, like Pavlov’s dog, the mere mention of this move is causing stocks to once again reach all-time highs. Cutting rates, all-time highs? Hmmm.
We’re on the razor’s edge of taking military action in the ever-volatile Middle East, and investors are appearing to shrug their collective shoulders. Even more bizarre, our president is tweeting about his most inner thoughts on why he ordered strikes and abruptly reversed course in the span of a few minutes. The market’s reaction? Inaudible. Hmmm.
Speaking of tweets, in just the last month or so, a trade deal with China was nearly complete only to see talks suddenly fall apart. And, how did investors learn about it all? Twitter. Clearly believing this was an appropriate way to announce changes in our trade policies, we were soon greeted with deeply threatening tweets about massive tariffs with Mexico. And those threats weren’t even tied to our trade policies. Hmmm.
We’re now over 10 years into our economic expansion with our national unemployment rate near a record-low of about 3.5% and recent inflation readings are just below 2%. Yet our federal deficit is butting right up against $1 trillion. Not long ago, this type of fiscal policy would have sparked outrage, concern and political hand-wringing. Today? Nada. Hmmm.
Speaking of debt, with the recent collapse in interest rates, the global markets now offer over $13 trillion of government debt yielding negative interest. Yes, you did hear that right. Ironically, it makes our own skinny 2% bond yields the envy of the developed world. Hmmm.
As we all know too well, we’re about to embark on another presidential campaign. With now 25 Democrats vying for the presidency, the two leading candidates are soon to turn 77 and 78 years old. That fact actually makes people forget that Trump would be 75 only a few months after his re-election. With all due respect, I haven’t personally met any men well into their 70s who think they should be running a large country, let alone a small one. Hmmm.
This fall marks my 20th year in the investment business and, yes, I do still have plenty of hair on my head and chin to scratch. Let me be clear about one thing, at no time is the world totally orderly. And, rarely are financial markets free of true head scratchers. Still, these are most interesting times and, I must admit, they are making me go, hmmm, a little too often lately!
Jason P. Tank, CFA is both the owner of Front Street Wealth Management, a purely fee-only advisory firm and the founder of the Money Series, a non-profit program committed to providing open-access to financial education, for all. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com