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Happy Bull Market Anniversary, Fed Two-Step, Home Planning (and more)

It’s official. At ten years, the US. stock bull market is the longest in our history. Does a slowing economy present a credible threat to stock investors? Both Washington and Wall Street have eyes on the Fed, which will have a major say. We get into all this and more and appreciate your interest. Feel free to forward to anyone who might be interested.

  • Slowing U.S. Economy: Economists generally expect the U.S. economy to grow around 2 percent in 2019. Ruchir Sharma, the Morgan Stanley chief global strategist, makes a compelling case for why this growth rate is both sufficient and not that far off long term growth rates. Charles Evans, the Chicago Fed President, says the chances of a recession are low.

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This Week's Big News Movers Plus Articles on Procrastination and Clean Energy Storage

It has been a HUGE week in terms of big news events.  The Mueller investigation concluded, the yield curve inverted, and the Brexit deadline is today – yikes!  You'll find articles on those weighty topics along with some interesting and fun articles to balance out the reading in this week's The Friday Buzz.  As always, thank you for reading, and please share! 

  • The Mueller Investigation Concluded:  After twenty-two months, the Special Counsel concluded the President's 2016 presidential campaign was not involved in Russian election meddling.  That political fight is now over, it's sure to be replaced by other political fights though they won't have the same gravitas.  I believe President Trump was spotted doing victory laps around the White House this week…

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Fed Leaves Rates Unchanged As Economy Slows (and More!)

The Fed chose to leave short term rates unchanged at the FOMC meeting this week, announcing that it did not foresee more rate hikes this year. The decision and announcement reinforce that the Fed is increasingly wary of current risks and is signaling that it will keep its foot off the interest rate brake indefinitely. Apart from the Fed and the economy, we encourage you to check out some interesting planning notes (e.g. Roth IRAs and retirement) and lifestyle notes relating to health and happiness as it relates to location. 

  • Why the Fed Turned Dovish: Nouriel Roubini, the widely followed NYU economics professor,  offers his insights into why the Fed has abandoned, at least temporarily, its plan to hike short term rates higher.

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A Patient Fed, an ECB About-Face, and RSWA March Madness!

Economic news this week was broad coming from the Fed Chair, the European Central Bank, plus an array of economic data.  Brexit is also coming to a critical point and could be disruptive to businesses globally.  And March Madness is about to start, and for those who are interested, we have an invite to participate in the RSWA bracket pool.    

Thank you for reading The Friday Buzz.  Please share with anyone who may have interest.  Enjoy March Madness and the articles!

  • The Fed Chairman Interview:  Jerome Powell, the Federal Reserve Chairman, was interviewed on 60 Minutes Sunday.  He said the Fed would be data-driven and patient with future rate hikes.  He also said the law was clear that he couldn't be fired, and he intended to serve his full four-year-term.  Though he was a little slow reacting to last fall's changing economic dynamics, overall, he seems to be a reasonable and capable Fed Chairman.

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Tax Refunds, Grit, China Trade Conflict (and More!)

With both stocks and bonds doing well for now and the China trade negotiations seemingly making progress, we will begin with several non-investment or economic notes and then circle back to the markets and economy toward the end. Tax refunds are a hot topic for starters.

  • Taxpayers Surprised: The initial returns (pun intended) are in on the new tax law changes, and many taxpayers have been unpleasantly surprised with the average tax refund down 8.4%. What some of  these taxpayers may have overlooked is that they may have already benefited from lower withholding throughout 2018.

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Earnings Beat Expectations to Date and Deciphering the Fed (and More)

We attributed the strong January stock rally to a bounce back from the December over-selling that occurred in the equity markets and to the Fed declaring its intention to pause future rate hikes, a stock friendly re-messaging. Earnings season is on us and will be a key driver in near term stock market performance. To date, fourth quarter earnings reports have not been stellar but are largely beating expectations. We also want to revisit the Fed decision to pause rate hikes in the context of an astute question recently asked by a client.

  • Earnings Beating Expectations: We know that over time stock returns correlate closely with corporate earnings, adjusting for inflation. The current situation appears to be a period when exceeding expectations matters as much or more than objective earnings. It’s as if investors are exhaling, noting that earnings may not be great but are better than feared. This NYT article illustrates the dynamic.

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Gov Back to Work, Jay POWell to the Rescue, and Quantum Computers

As cold gripped much of the nation this week with temperatures not seen in a generation, the markets were feeling much cozier.  The economy, markets, and capital investment are linked to confidence.  Last quarter, confidence was dropping precipitously due to Fed comments, trade issues, concerns about world growth, and the government shutdown.  Since the beginning of January, confidence has slowly been increasing, and this week it seemed to notch up significantly due to the apparent reversal from some of the biggest concerns from last quarter. 

 Please share The Friday Buzz with anyone who may have interest.  Thank you for your time and enjoy the articles!

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Positive Fed and China Trade Talk News Propels Stock Markets to Strong 2019 Start

Two important developments have boosted stock markets in the new year. First, the Fed has adopted a more dovish tone relative to additional rate increases in 2019. Second, negotiations between the U.S. and China have apparently been successful in narrowing the trade differences. The relief felt by equity investors is palpable. Perceived risk may have fallen but lurks near the surface of investing waters. Caution is warranted. 

  • Powell’s Do-Over: Fed Chairman Powell softened his tone on future rate increases in a recent speech, realizing that the Fed needs to project more flexibility. With inflation in check, we see no reason why the Fed needs to engineer a recession with unnecessary rate hikes at a sensitive time.

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Factors in 2019 for Investors, 2019 Retirement Saving Limits, and the World is Getting Better, Really…

We are starting the new year, much how we ended the last - with stock market volatility and uncertainties surrounding global economic growth, Fed rates, tariffs, and the government shutdown.  Most of the current challenges are self-inflicted and controllable to an extent. One does not want to be Pollyannaish, but these challenges can be resolved.  What happens in January may go a long way in determining if they will be resolved or continue to be a thorn in investor's sides.

Thank you for taking a few minutes of your time to read and share The Friday Buzz.      

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Positive Economic Fundamentals vs. Negative Investor Emotions

Concerns about the slowing global economy and increasing short term interest rates are valid. However, the fear that likely drove the substantial December stock sell-off appears disproportional to the actual risks to the economy and earnings. Slower economic growth does not equate to a near term recession. What might have been a relatively mild correction was unquestionably exacerbated by a general sense of Washington instability. The massive gain in the U.S. stock market, this past Wednesday, may reflect the perception that the market is oversold, but it is too soon to have any degree of conviction. Given the market volatility and the holidays, the notes this week are few in number and market focused.

  • Economy Is Strong. Leadership Is Shaky: This NYT article makes the case that leadership missteps are part of the problem. We agree. The global and U.S. economies are slowing but do not appear to be imminent danger of going into a recession.

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