More of the Same in 2019
Which forecasts are you chasing early in 2019?
The year begins as it ended: with considerable uncertainty over serious challenges domestically and globally. However, if your investments are thoughtfully allocated, you can ignore most of the chatter involving year-ahead forecasts from the cheap seats.
It's Hard to Make Long-term Commitments
This brings us to the current environment. Global financial markets have become technical and myopic out of necessity. We hear the term "data driven," but what data exactly? The answer changes minute-by-minute. Economists and analysts have noted often that long cycle investing leans on certainty and confidence for big economy-driving decisions--capital for plants, machines, innovation, and acquisitions. Short cycle investing is a fallback, when capital is ample, but confidence waxes and wanes. Stock buybacks and dividend increases may help the market, but likely do little for the economy fundamentally, or for individual companies organically. Right now there is abundant evidence of a short cycle mentality as we await the resolution of crucial economic conflicts such as Brexit, trade, and monetary policy.
The Fed Seems to Have Only One Job
We thought the Federal Reserve had a dual mandate. It seems, however, that investors are telling the Fed "you only have one job!" Many commentators (and a politician or two) were demanding that the Fed soften its stance on rate increases, and it appears the Fed heard the messages. Unsurprisingly, the market immediately rallied even in the face of a few early revenue and profit resets from leading global companies. Evidence of slowing is still in view, but signs of a full-on recession are scarce for now.
Hashtags That Awaken, Gather, and Focus Energies
History is replete with similar periods of unrest, disorder, and chaos. Like financial markets, the absence of social/political volatility is probably more anomalous than its return. It is likely true, however, that the nature of more recent disturbances is greatly influenced by innovation. The term "contemporary activism" glues the new to the old. The personalization of protest feels like an emerging phenomenon, forming the raw material for which the hashtag becomes a magnifying glass to rapidly awaken, gather and focus frustrations into firestorms of discontent. Global movements are spun from these efficient networks.
Innovation and Agitation Span the Generations
We think about 2019 and beyond and we can see a world spinning around its axis of innovation and agitation. We expect no comfortable equilibrium upon which to plan a life of social interaction and investing. Remember, the "averages" are merely points through which financial markets cycle from high to low and back again.
So, we end with the poetry of an R&B musician who writes and sings of this inexorable "push, pull, tear." How far can it all "stretch" before the unintentional outcome?
Every day the deficit grows
You spend more than you own
Papa always said to me
Keep a close eye on your authority
You say that you care
I was unaware...
All you do is push, pull, tear
We can't stretch it any farther
Push, pull, tear...
Every day taxes increase
So is this our land or is this our lease?
Papa said, "Son, it's the land of the free"
As he broke his back trying to make ends meet
(Pablo Sebastian/Allen Stone, 2011)
The 2020 US election cycle has already begun as one "explorer" after another makes her/his interest known. Financial asset prices may be unusually influenced by all the speech-making that is to come.
Important Disclaimer: This blog does not constitute a solicitation or recommendation of any kind. It appears for educational purposes only. Consult your financial adviser before taking any action.