A October Overview
The economy stalled a bit in the third quarter as the stream of hurricanes stemmed consumer spending for the three-month period. The markets have shrugged off this lull and pushed higher with the expectations that the economy would soon recover. There are several global trends we are following at this point:
Do we get a “game-changing” tax cut? – It appears that we will get the tax cut that most investors are expecting. The good news – It makes the US businesses more competitive on a global scale. The bad news – It’s already priced into the equity markets and, if it doesn’t get passed, we would probably experience a hefty correction.
Will earnings continue to impress? – If recent earnings are any indication, the answer is yes. In particular, technology earnings have been off the charts. In fact, Amazon, Alphabet and Microsoft added $80 billion (yes, that’s a “B”) in one day after their recent earnings announcement. The rest of the S&P has also seen strong improvement. But, the bigger question is whether or not the earnings can continue higher in the near future.
The global economies are lifting right now and earnings have been strong. With low interest rates around the world, this economic growth cycle has legs. This is a very positive scenario and one we think will push markets higher for the long term. For now, we are focused on trying to find the best sectors to invest in for this particular economy.