Hi Everybody,
I hope you are enjoying a nice summer—it’s flying by as is always the case.
This brief video will touch on some of the questions we’ve been getting from clients regarding what is going on in the markets and what we can expect as we get into the tail end of the year.
1st Question: How can the market indexes be at all-time highs with all the headwinds the economy is facing?
Most of the major indexes are at all-time highs, but the economy is slowing down. We have tariff worries, and inflation nervousness. That doesn’t seem to make sense, does it?
There is an old market adage that says, “Whatever makes sense, doesn’t make money.” Case in point.
Actually, earnings for a high number of companies are up, and their guidance going forward has generally been good, so stock prices move up. As the market makes new all-time highs, there is no upside resistance that causes investors to sell the indexes.
And this will go on until it stops. Prices can go higher than you might think, but it will stop one day. I don’t know what will cause it, but it will be something.
2nd Question: What do you think about the tariffs?
There is a lot of talk about tariffs being a hidden tax increase. I look at this as a backward way that our politicians raise taxes without saying they are raising taxes. The country has a big debt burden. You either need to raise taxes or have the economy grow. It looks like the government is trying to get both. Hopefully, they will succeed and bring down the debt.
The oldest economic truth is that there ain’t no such thing as a free lunch. And we are not eating at a cheap restaurant when it comes to paying off debt.
3rd Question: What do you think about the Federal Reserve cutting interest rates?
There is much talk about the Fed cutting interest rates. The markets are expecting a cut in September: a quarter point? A half point? So don’t be surprised if the markets pull back after a rate cut—it has to be priced in already. On top of that, we are in the volatile time of the year where crazy stuff has happened in the past.
It doesn’t bother me that our President complains daily about the Fed not cutting interest rates. Every president wants lower interest rates. Next time we talk, I’ll share an anecdote about how Lyndon Johnson dealt with his Fed Chairman. It’s kind of funny.
Speaking of the past and present…
You think inflation is a new worry?
You think this is the first time for a gold bull market?
You think this is the first time people have worried about their money?
You think the Big Beautiful Tax Bill was something new? No, in my long career I’ve seen a bunch of tax reform acts. By the way, I think the title of this latest tax bill was the worst; somebody needed to come up with something better than that, but that’s just my opinion.
As the old saying goes, “There is nothing new under the sun.” So, keep that in mind the next time we appear to be approaching an insurmountable problem. It will be resolved, maybe not how we want it, but a resolution will occur nevertheless. In a lot of cases, pessimism sounds profound and optimism sounds superficial. Personally, I prefer to stay optimistic.
Until next time, I’m Phil Albitz. Thanks for watching.
