Of course Democrats want huge tax increases. Tax increases cause expanding deadweight loss and ultimately contract economic growth. Democrats clearly want to crash the economy while President Trump is in office to make sure that he’s a one-term President only.
Warren Buffett let the cat out of the bag today on why the rich and powerful are not selling stocks. Warren Buffett told CNBC today that he’s not selling and booking profits in his positions until he finds out what the capital gains tax rate will be under a Trump tax cut. Think about it. The difference could be millions of dollars in lost profit if stocks are sold before the end of the year and before Trump’s tax cut hits in 2018. Continue reading “Warren Buffett Let Cat Out of Bag On Why Rich Are Not Selling Stocks”
The Russell 2000 crushed the market prediction path and exploded higher this week on Republican’s tax plan. The idea is that small cap stocks are mostly domestic companies that are less able to take advantage of tax loop-holes and so they are the companies that will benefit the most from tax cuts. Continue reading “Russell 2000 Market Prediction Update For 9-28-2017”
Shortly after President Trump won the election in November of 2016, big money raced into the US dollar. The idea was that a new President with an America first agenda in which China would be labeled a currency manipulator had to be good for the US dollar. Lots of money raced into the US dollar and in funds like the PowerShares DB US Dollar Index Bullish Fund (UUP). Continue reading “Trump US Dollar Trade Falls Apart As Investors Race For the Exit”
A bear market is coming if President Trump’s agenda does not move forward quickly. I have been saying for months now that the Federal Reserve is hiking rates not because we are in a strong economy that needs cooling off but instead to save pension fund holders and others who depend on the income generated from bond yields.
The Trump rally ended back in March. That was the turning point when the markets started pricing in the reality that President Trump was being blocked even on a common-sense travel ban from radical Muslim countries that support terrorists and that generally dislike America. If a common-sense travel ban can’t even get put in place, how does Trump’s economic agenda have any hope?
Bear Market Coming As Economy Slows
We are six months into Trump’s presidency and we have no clear plan for raising the debt ceiling when the government runs out of money in August. We have no big comprehensive corporate tax reform yet. We have no tax cuts for working Americans yet. We have no repatriation of trillions of overseas dollars yet. We have no massive infrastructure plan to boost the economy yet. Meanwhile, the Federal Reserve continues to hike rates.
The chart below shows the effects of rate hikes on commercial and industrial loans.
The arrows mark the three rate hikes since the end of the Great Recession. When the Fed hikes rates next week, we could have commercial and industrial loans drop below the zero line and signal a contraction for the first time since the Great Recession.
Today, there’s a greater chance that a bear market will happen than not happen because of trend logic. Trend logic is the idea that a trend will continue until it actually ends. Assume continuation of the previous trend until proven otherwise. The Federal Reserve is on a rate hike up-trend. Commercial and industrial loans are in a downtrend. Assuming these trends continue, the yield curve will go flat or inverted within the next few months. The only thing that will stop this gloomy scenario from taking place is if one of those trends change.
The only thing capable of preventing the next bear market is if Trump’s economic agenda moves forward on tax cuts and infrastructure spending, or if the Federal Reserve does not raise rates in June. Since I see neither of these outcomes happening right now, rather than assume a magical trend change appearing from out of nowhere, it’s better to assume continuation of the previous trends until proven otherwise.
Peter Schiff gave an excellent speech at Cambridge House recently about the deteriorating US economy, check it out:
The ADP national employment report surprised to the upside which has ignited a stock market rally. The private sector employment report showed that 253,000 jobs were added in May. The estimate was for 185,000 jobs according to Reuters (link above).
ADP National Employment Report Means June Fed Rate Hike Is On
The ADP report is secondary to the month nonfarm payrolls data coming on Friday. We have seen the ADP number be completely opposite the nonfarm payrolls number. Nevertheless, I think we’re on for a rate hike in June unless Friday’s number is really bad.
The real question now is if the Federal Reserve is raising rates too quickly for the economy to support because they are basing too much of that decision on unemployment numbers. Until lower and middle income earners get a big tax cut and the cost of healthcare goes down, it’s a growing concern if the economy can handle more rate hikes.