Market Movement, Candid on the Candidates & Immigration Crisis

Yes, you read that right! In less than five minutes on with Stuart Varney I managed to discuss the likely next moves for the market, which candidates I think would be best for economic growth and the European immigration crisis… and that was on less than three cups of coffee. Although, to be fair, the sheer terror of making an absolute ass out of myself on national television does provide just a wee bit of adrenaline to put it mildly!

So market moves… S&P 500 went on a tear during the early part of March, but it looks to me to be mostly a momentum move with those stocks that got hit hardest performing the best, all the while earnings expectations keep getting lowered. Think about that for a moment, earnings expectations are lower in early March than at the end of January but stocks are moving higher? Companies are telling us their performance will be weaker than previously thought, yet investors are paying more for their shares? Yes, we’ve gotten a reprieve from crashing oil prices and that is certainly a welcome relief, but we are still facing a strong dollar headwind, as other nations continue to try to stimulate their domestic economies by devaluing their currencies, which regardless of what the Fed does, will strengthen the dollar. That makes U.S. exports less competitive. So while we could see this move up continue for a bit, when I look at all the data, I think it is more likely that this will be a bounce that won’t take us to new highs and the overall downtrend we’ve been seeing in equities since last May will eventually resume.

As for the candidates, I like to keep it simple. The bigger the government, the more opinions you get. The more opinions you have, the more the government gets involved in how businesses from the startup to the gargantuan are run. That makes it more expensive to run a business and makes businesses in aggregate less likely to expand as bigger government means more rules that they have to try and not break or offer the lovely little campaign donation here or there – still more expense. Given the headwinds the U.S. is already facing, more government red tape means less growth.

Next on to minimum wage, just look at what has happened in those cities that have significantly pushed up the minimum wage, such as Seattle. Many smaller businesses have shut down and unemployment for the lower paid wage earners has risen. That is not an improvement for the economy.

Next I look at the tax code. That thing is way too damn big and complex which means way too much time and effort is spent trying to figure out how to pay taxes and how to not pay more than necessary. That is time companies and individuals should be spending on doing what they do better, doing it more efficiently and doing it with a higher level of quality. Instead we have an enormous industry built up around figuring out how to dot i’s and cross t’s to satisfy a monstrously sized IRS. All that is money, time and effort NOT going into growing the economy.

As for the immigrant crisis, this is truly a humanitarian crisis of epic proportions, complicated by understandable fears of terrorism and violence. No nation, no leader has yet to get a handle on a productive way to manage this horrific problem, meanwhile innocent people are dying. They are dying when they try to escape their war-ravaged homes for a better life and they are dying when they stay home and try to fight to protect the land of their birth. There are no easy answers here and the strain of it all is putting enormous pressure on the european union, which is already wobbly with all sorts of debt-induced cracks.


About the Author

Lenore Hawkins, Chief Macro Strategist
Lenore Hawkins serves as the Chief Macro Strategist for Tematica Research. With over 20 years of experience in finance, strategic planning, risk management, asset valuation and operations optimization, her focus is primarily on macroeconomic influences and identification of those long-term themes that create investing headwinds or tailwinds.

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