My parents were born in the mid 1940’s, which makes them part of the “Baby Boomer” generation. They were raised in what would be considered very rural areas by todays standards. One of the best things they taught me was the old saying, “sticks and stones may break your bones, but words will never hurt you.” In fact, as a child, if I ever came home complaining about what someone said to me they would simply respond, “sticks and stones Matthew.” I am grateful that my parents taught me that lesson as it has helped me in many areas of my life. Strangely, I find that it is especially useful in the current investment climate.
Last quarter I wrote about the “Trump Bump” in the stock market and that, “there is nothing that has fundamentally changed since November 7, 2016. It is only the perception that things will be better in the future.” This remains true today, which is why we have seen the stock market take a pause as of late. For many, there is more uncertainty today than when Trump was elected President, which is understandable. It seems like every day there’s a new tweet, press conference, or speech that leaves many scratching their heads as to what it means for the economy and their hard earned money. The media continues to believe that each new comment will cause the stock market to tumble. Yet, that has not occurred. Why?
The simple answer is that none of the comments made will have much of an effect on the economy or the stock market. The reason lies in the lesson my parents taught me as a child. The “words” spoken are far less important than the “sticks and stones” (actions taken). It is imperative that we strip away the things that are said and focus on what actions are actually done. After doing this we know 3 things for certain.
First, we know that Trump intends to do most things he committed to on the campaign trail. Secondly, he wants to get things done as quickly as possible. Lastly, he is willing to make a deal with anyone that will assist him with the first two points. These 3 points create a prism that is imperative for us to utilize if we are to understand the future direction of the economy and stock market. I am certain there will be fundamental changes over the next 18-24 months. Furthermore, those changes will likely present opportunities.
Those changes are all but impossible to recognize if we focus on the things that are said. Thus, it is more important than ever that we focus on what is actually done. The plethora of comments only muddy the waters. In reality, most comments tend to move our attentions away from the information that will guide our investment decisions. Thus, I recommend we change the old adage to, “Executive orders signed and laws passed might make you money but tweets will never hurt you.”
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
