Shutdown Showdown, Endangered Budget Hawks and Longevity Breakthroughs

Posted in , , , , , By David M. Smith

What a difference two months makes.  February has continued January's uptrend in the stock markets.  As bad as things looked and felt in November and December, this year has felt the opposite.  Markets tend to have momentum, either positive or negative.  Once a trend is established, a catalyst is required to reverse the trend.  The Federal Reserve's comments in Q4 helped fuel the negative sentiment which sent the markets in a tailspin, and their bullish comments in January created the current momentum we are enjoying.  Let's hope it continues.

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  • The Markets are Off and Running – For Now:  As the markets turned lower late last year, the momentum was amplified by analysts and traders who watch technical signals.  Last quarter, many major technical measures were flashing sell signals.  Well many of those same technical readings have recently turned to buy signals.  Though nothing is ever certain, it is a good sign for markets in the near-term.
  • Government Shutdown Averted?  With the February 15th deadline approaching, Congress was working on a resolution to avoid another Federal government shutdown and the rumor was that President Trump was inclined to sign the bill.  Congress hasn't displayed this much energy on solving an issue in quite a while, which goes to show you how little appetite there is for another work stoppage.  If the bill passes, the border wall issue won't go away, but it looks like the wall won't be fully funded. 
  • Prices Remain Stable:  On Wednesday, the Labor Department reported that the Consumer Price Index (CPI) was unchanged in January for the third straight month.  Tame inflation will give the Federal Reserve all that it needs to leave short-term interest rates alone.  They will be keeping an eye on core-CPI, which leaves out volatile food and energy, as it rose .2% for the fifth straight month.
  • Initial Tax Returns Have Been Filed, and the Survey Says…  Not many tax returns have been completed, but for many of the ones that have, the refunds have been smaller than in the past.  This is due to rule changes for withholding taxes from paychecks, and because some filers in high-tax states are not able to fully itemized state income and property taxes.  In many cases, the filer may be paying less tax overall, it just doesn't feel like it when their refund pales in comparison to previous years.  If you are surprised by your taxes this year, the time to prepare for the 2019 filing is now.  Work with your accountant and advisor on any tax saving strategies you can employ to lessen the tax bite.
  • Should Budget Hawks Be Listed on the Endangered Species List?  For the first three months of the U.S. government's fiscal year, the budget deficit was $319B.  In a few years the annual fiscal deficit is projected to cross the psychologically important $1 Trillion mark.  The deficit is widening due to growing spending while revenues are flat due to the recent tax changes.  Currently, the rarest sighting in the political animal kingdom is the fiscal hawk.  But they'll be back one day, especially as the red ink crosses $1T and the headlines start.
  • Does Following Copper Make Cents?  Many market watchers follow the base metals markets.  Metals go into so many products like computers, cars, and homes, that they can be a good precursor for economic health.  If metal prices are rising, that is a good sign for the future, and vice versa.  A favorite metal is copper.  Due to its track record in shadowing the economy, it has earned the nickname Dr. Copper, as in having a PhD in Economics.  The graph below shows the trailing twelve-month price of copper.  The price declined rapidly over the summer, and stocks fell three months later, and the price started rising in January, just like stocks.  But it is worth noting that trends are not as clear if looking at a three-month chart or a three-year chart.  Nonetheless, base metals and copper are some of the leading indicators we like to follow.

Copper March 2019Source: The Wall Street Journal 

  • Visual Charts Help Tell a Story:  Sometimes you can examine data for hours just to gain the perspective a chart or visual can give you in seconds.  I love the website Visual Capitalist since they consistently list interesting visuals regarding data.  Some interesting ones I viewed recently were What Assets Make Up Wealth, The Wealthiest and Poorest County in Every U.S. State, and The Crime Rate Perception Gap.  Good stuff.
  • Research in Longevity & Vitality:  I follow entrepreneur and visionary Peter Diamandis on social media.  I like to read about his insights regarding cutting edge technology and science.  I recently read three of his articles about the large amount of funding going into human longevity research and how it may impact all of us in the near future.  The articles appeared on LinkedIn, so I hope you can access them.  They are on Why We Age, A Renaissance of Drugs and Genomics, and Artificial Intelligence Augments Healthcare and Longevity.
  • Nelson Mandela Quote: “What counts is not the mere fact that we have lived.  It is what difference we have made to the lives of others that will determine the significance of the life we lead.”

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About the Author David M. Smith

David is a Senior Financial Advisor and the firm’s Co-Chief Investment Officer. He has more than 20 years’ experience in the financial services industry and holds the highly respected Certified Investment Management Analyst™ and Certified Financial Planner™ designations; he is a Co-Managing Member of the firm.
Disclaimer and Disclosures: Past performance is no guarantee of future results. The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. Our opinions are subject to change without notice as market and economic conditions shift.