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The Best of What They Said and I Read Week Ending 11/11/18

Short excerpts from articles I found interesting

I may not agree with the author and the following material is not intended as investment advice

Barron’s – November 9, 2018 – Dow Gains 718 Points, but Divisions Run Deep – Ben Levisohn

  • “…The Dow Jones Industrial Average gained 718.47 points, or 2.8%, to 25,989.30, while the S&P 500 rose 2.1% to 2781.01. The Nasdaq Composite advanced 0.7% to 7406.90. It was the Nasdaq’s first two-week winning streak since August.”
  •  “...Bank of America Merrill Lynch strategist James Barty argues that if a deal between the U.S. and China can be reached at the G20 meeting this month…economists would be able to lift their 2019 global growth estimates and stocks could resume their rally…“We continue to believe that the outcome of US/China trade talks is crucial to global markets,” Barty contends. “Failure would accentuate the deterioration in global growth and fully justify investors’ fears.”  And for good reason. Third-quarter earnings saw an uptick in the number of companies blaming tariffs for lackluster guidance, and we can expect more to do so the longer the trade war trundles on.”

U.S. Global Investors Investor Alert– November 9, 2018 – Frank Holmes

  • “…This week the market voted to reward stocks in the aftermath of the midterm elections, which gave Democrats control of the House and left the Senate in the hands of Republicans. This all but guarantees that gridlock will be the status quo in Washington, at least for the next two years…But in the short term, markets showed a lot of enthusiasm. The S&P 500 Index advanced more than 2 percent on Wednesday, marking the best post-midterm rally since 1982. Stocks got slammed only after the Federal Reserve announced more rate hikes were forthcoming”
  • “…I want to remind you that we’ve already entered the three most bullish quarters for stocks in the four-year presidential cycle. Average returns in the fourth quarter of year two have historically been 4 percent, followed by 5.2 percent in the first quarter of year three and 3.6 percent in the second quarter.”
  • “…Down more than 20 percent from its recent high of $76 in early October, oil was trading below $60 a barrel today and is now considered to be in a bear market.  Cannabis producer Tilray gained more than 30 percent on Wednesday after Michigan became the 10th U.S. state to legalize marijuana. Another contributing factor to the stock’s bounce was Jeff Sessions, a staunch opponent of legal weed, resigning as U.S. attorney general…The Federal Reserve held its key interest rate in a range between 2 percent and 2.25 percent at the conclusion of its two-day meeting on Thursday. It also signaled it would continue raising rates gradually amid stable economic growth.”
  • “…Former U.S. Treasury secretary Hank Paulson has warned of an “economic iron curtain” dividing the world if the U.S. and China fail to resolve their burgeoning strategic differences. Referring to the "unprecedented political pressure on cross-national supply chains" and "great power competition surges" across the Indo-Pacific, Paulson warned of a once-healthy strategic competition tipping into "a full-blown cold war."

The Kiplinger Letter – November 9, 2018

  • “…After hitting its stride earlier this year… The global economy is about to lose a step…It won’t be a major downturn…no recession or anything dire. In fact, total global GDP will still expand by a healthy 3.6% in 2019…off a bit from 3.7% this year, but a solid overall performance.  But the peak of the global boom has passed.  Future expansion will be more measured…Why the less rosy outlook?  Many reasons:Trade disputes, especially between the U.S. and China, the world’s top two economies. An end to the cycle of tariffs and counter tariffs being levied by Washington and Beijing is still a distant prospect.  China’s economy is in for tough sledding as American duties on many…and perhaps all…of the goods it sells to the U.S. start to take a toll.  Look for China’s GDP to expand by 6.3% next year, after 6.6% in 2018 and double digits not too many years ago. 

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