1st Quarter Commentary 2017: Back To The Future
Hold on sports fans, it ain’t over ‘til the fat lady sings. Feeling like 1985? Kind of Reaganesque? Whoa Bessie, as Jim Cramer loves to say, “Now we are over the tips of our skis.” Here’s what we know: we elected a President who is definitely business friendly and wants very badly to take 100% of the credit for reigniting the American economy. Since his victory in early November of 2016, the increase in the S&P 500 has been nearly 10%! Please understand, this move in the market is based completely on what may come. We all enjoyed this drunkenness through February of 2017 and then we began treading water. The first obvious cold water on our party was the unsuccessful healthcare bill that was never to be. That loss put a question in the mind of Mr. Market as to whether Trump’s other agenda items would be any more successful than his first legislative attempt. Consequently, March of 2017 traded in a fairly tight range and most broad equity indices ended relatively flat on the month, but up between 4-6 percent on the year.
The 1980’s were characterized by Reagan in two specific areas: military strength and the courage of his convictions, and tax reform with the Tax Reform Act of 1986. Without some corporate tax relief and a semblance of a new healthcare program, the markets could definitely lose confidence in “The Donald.” Currently, without some very positive earnings, most stocks are poised to move sideways and to be very susceptible to political bombshells. So, what does one do? Is the Fed going to increase rates again any time soon? Is North Korea going to be properly held in check by China? What could any and or all of these items do to our market, and what is the proper strategy?
Simply put, check your cash for upcoming needs and make sure it’s in the money market. Other than that, we advise staying long the market just as we did through the 80’s which included 10/19/87 because there isn’t a better game in town. Also, have enough cash to take advantage of a 1987 or a 2008 type of scenario. Look at the returns on monies invested very shortly after those periods. Finally, turn off CNBC and get ready to enjoy a beautiful spring.
A.G. Campbell Advisory, LLC