A Word from Jeff – April 2017

As I write this in late March the US stock markets continue to float near record levels, without a noticeable correction since the steep run up from the election. This despite the recent Fed rate rise, and its signaling that rates will continue to go up regularly through this year, and next. While the US economy still continues to improve and is finally generating more normal levels of inflation, the lofty stock rally keyed to an assumed explosive expansion based on expectations of Trumponomics may be a bit premature.  In other words, the Trump rally has widely been explained by expectations of strong growth coming from tax cuts, massive infrastructure investments (The Wall, roads, airports etc.), and the easing of business regulations to make it easier to make money and build wealth. And while all these things show much promise and may indeed come to pass, there are two flies in the stock rally ointment:  1) the President has no Harry Potter wand, and must work patiently and in a spirit of compromise with Congress to effect real change, which will take a while;  and 2) actual changes enabled by compromise legislation may be quite different than those spouted on the campaign stump, possibly blunting the impact.  In yet other words, improvements may take longer, and be markedly different, than the market expects, and when the market finally realizes this, it may shed some air.

By the way, this was much the Fed’s recently revealed view, and its economic projections, while still quite positive, were much more subdued than those apparently expected by the market: while things are clearly improving, the Fed – a band of fairly powerful economic thinkers – still predicts subpar – below 3% – growth going forward at this point.  For these reasons, Camarda still expects a fairly strong market correction, which should be used as a buying opportunity for those with cash.  Note we expect a correction and not a bear market, meaning we view the longer term trend as up. While things may take a while and be different than envisioned, Camarda believes the change in Washington should give the old, old US bull market new legs and swift sneakers, and we are bullish out several years, or longer. We just don’t expect it to keep going straight up, and neither should you.

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