February 2017 Monthly Outlook – “Politics”
“Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and applying the wrong remedies.” . . . Groucho Marx
Politics has been front and center since January 20, 2017. Early in the month of January 2017, the financial markets were going sideways until the inauguration. It then spiked to all-time highs on the equity markets right after the inauguration, only to decline roughly 1% in the last week of the month.
I anticipate that the financial markets will continue to be volatile because of the uncertainty caused by the new administration’s agenda. On one hand, you have the potentially pro-growth policies of lower taxes and less regulation. On the other hand, you have the potentially negative impact of protectionism and trade wars. I am hoping they don’t live up to Groucho’s quote.
As for your investments, my general outlook is that inflation is inching up, which should lead to interest rates moving higher going forward. Therefore, I favor equities over bonds. At close to all-time highs, I feel that US equities are fairly valued and likely offer only single digit returns. I am watching International equities for opportunities as they are still undervalued and are showing signs of life. I also anticipate a changing industry landscape as the new administration’s policies help some industries and hurt others. On a short-term basis, February has been the worst month for equities in post-election years going back to 1950, so I am being somewhat cautious right now.
On the economic front, I see virtually no indication of a recession in the near future. As can been seen in the following chart, recessions generally occur after the Leading Economic Index starts to decline. The small embedded chart shows that this index has been on a steady upward trend since June 2016. There also improving economic signs in Europe. However, I don’t expect economic growth to speed up much from the current 2.5% level in the US and 3.5% level globally.
source: Doug Short, Advisor Perspectives
Please call me if you have any questions or concerns about this report or your portfolio.
February Calendar of Events (comments and additions for future months are always welcome)
- February is Black History Month. Let’s all strive for understanding and acceptance for people of all colors, nationality, and religions.
February 2nd Groundhog Day – let’s hope he sees his shadow
February 14th Valentine’s Day
February 20th Presidents Day
February 28th Mardi Gras
I hope this report is useful to you. Feel free to share it with anyone you feel would benefit from the information.