June 11, 5:00 pm EST

Last week we stepped through all of the components of economic output and talked about the setup for positive surprises.  Keep in mind, the economy is running at near a 3% pace already.  And if Trumponomics is just in the early stages of materializing in the data on consumption, investment, government spending and exports, then we may be in for a big growth number.

On Friday we talked about the exports (i.e. the trade) component.  On that note, the media was stirring over the combative tone from G7 events over the weekend.  What I heard was the potential for big movement (i.e. gains on U.S. exports, which will drive gains in GDP).  Trump went in and proposed taking down all trade barriers.  That’s negotiating from an extreme.  And that typically brings about movement.  Quickly, trade partners were discussing “reducing” barriers.

With hotter than expected growth coming, how will that effect Fed policy?

We will soon see.  The Fed meets this week.  They continue their path of normalizing rates.  They’ve hiked once in 2015, once in 2016, three times in 2017 and once, thus far, this year.  The market is nearly fully pricing in a second hike for the year on Wednesday.  And expectations are for another hike in September.   We’ll see this week if they’re adjusting uptheir growth forecasts.

As for the rate path:  Remember, Powell is a Trump appointee, and from what we’ve heard from him thus far, he sounds like someone that’s not going to risk chipping away at the recovery by jumping ahead with overly aggressive rate hikes.  Unlike the last regime, he will likely take a “whites of inflation’s eyes” approach.

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February 13, 2017, 3:30pm EST                                                                                       Invest Alongside Billionaires For $297/Qtr


Stocks continue to print new record highs.  Let’s talk about why.

First, as we know, the most powerful underlying force for stocks right now is prospects of a massive corporate tax cut, deregulation, a huge infrastructure spend and trillions of dollars of corporate repatriation coming.  But quietly, among all of the Trump attention, earnings are also driving stocks.  More than 70% of S&P 500 companies have reported.  About 2/3rds of the companies have beat Wall Street estimates.  And most importantly, earnings in Q4 have grown at 3.1% year-over-year.  That’s the first consecutive positive growth reading since Q4 2014/ Q1 2015.

Meanwhile, yields have remained quiet.  And oil prices have remained quiet.  That’s positive for stocks.  Take a look at the graphic below …

You can see, stocks and most commodities continue to rise on the growth outlook.  Yields and energy should be rising too.  But the 10 year yield has barely budged all year — same for oil.  Of course, higher rates, too fast, are a countervailing force to the pro-growth policies.  Same can be said for higher oil too fast.  With that, both are adding more “fuel” to stocks.

On the rate front, we’ll hear from Janet Yellen this week, as she gives prepared remarks on the economy to Congress, and takes questions.

She’s been a communications disaster for the Fed. Most recently, following the Fed’s December rate hike, she backtracked on her comments made a few months prior, when she said the Fed would let the economy run hot.  She denied that in December.  Still, the 10-year yield is about 10 basis points lower than where it closed following that December press conference.  I wouldn’t be surprised to see a more dovish tone from Yellen this time around, in effort to walk market rates a little lower, to take the pressure off of the Fed and to continue stimulating optimism about the economy.

On Friday we looked at four important charts for markets as we head into this week:  the dollar/yen exchange rate, the Nikkei (Japanese stocks), the DAX (German Stocks), and the Shanghai Composite (Chinese stocks).
With U.S. stocks printing new record highs by the day, these three stock markets are ready to make a big catch-up run.  It’s just a matter of when.  And I argued that a positive tone coming from the meeting of U.S. and Japanese leadership, under the scrutiny of trade tensions, could be the greenlight to get these markets going.  That includes a stronger dollar vs. the yen.    All are moving in the right direction today.

On the China front, we looked at this chart on Friday.

As I said, “Copper has made a run (up 10% ytd).  That typically correlates well with expectations of global growth.  Global growth is typically good for China.  Of course, they are in the crosshairs of Trump’s fair trade movement, but if you think there’s a chance that more fair trade terms can be a win for the U.S. and a win for China, then Chinese stocks are a bargain here.”

Copper is surged again today on a supply disruption and has technically broken out.

This should continue to spark a move in the Chinese stock market.

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January 26, 2017, 3:30pm EST                                                                                         Invest Alongside Billionaires For $297/Qtr

We talked yesterday about the significance of Dow 20,000.  Higher stock prices are fuel for higher stock prices.  And higher stock prices are fuel for better economic growth.  It’s all self-reinforcing, and we discussed the reasons why stocks can still go much, much higher from here.
As I said, this serves as a validation marker for some that have been waiting to see what the Trump effect might be on markets.  If you’ve listened to the consensus voice on Trumponomics, they’ve told you over and over how disastrous the protectionist rhetoric would be the U.S. economy and for the world.  I’ve said, given the position of the world, post-Great recession, that Trump’s tough talk is leverage that can be used to ultimately create a fair playing field on trade, which can ultimately lead toward a rebalancing of the global economy — something that has to take place to put the world back on a path of sustainable growth, and end the cycle of booms and busts. That’s a win-win for everyone.

We’ve seen it working with industry leaders (they’re playing ball).  And expect a similar outcome on the geopolitical front.  This approach doesn’t work in normal times, but we’re not in normal times, almost a decade after the onset of the global financial crisis — where global economies remain weak and vulnerable.

With this in mind, Mexico and Canada are in focus with the announcement this week of the NAFTA renegotiation, the wall and the Keystone pipeline.  And the media is hot and heavy on the cancellation of a trip to the White House by the Mexican President.

Let’s take a look at how Trumponomics is working for our two biggest trading partners, thus far.

This is the chart of the dollar versus the Mexican Peso.  The rising line represents the dollar strengthening and the peso weakening, and vice versa.

If we look at this exchange rate as a gauge of trade partner health, we’ve seen the peso hit hard through the campaigning period under the protectionist fears of a Trump administration – and post election.  That has represented a negative-scenario message for Mexico. But since the inauguration, the peso has been strengthening (not weakening), even as President Trump signed an executive order to renegotiate NAFTA. The message behind that usually means: the U.S. does better, Mexico does better.

What about Mexican stocks? Similar story.  As the U.S. stock market is on record highs, the Mexican stock market too, is sitting on record highs. When the prospects are better for U.S. growth, our trade partners do better.

What about Canada?  The same story.  The Canadian stock market is on record highs.

The worst-case scenarios are good fodder for attracting readers and viewers.  That’s why the media is obsessively focused on the potential negatives. But with some perspective on the bigger picture, and with respect to the position of the world coming out of the crisis period, those worst-case scenarios have lower probabilities than they think, and would have you believe.  That’s why reality is crafting a very different story.

We are likely entering an incredible era for investing, which will be an opportunity for average investors to make up ground on the meager wealth creation and retirement savings opportunities of the past decade.  For help building a high potential portfolio for 2017, follow me in our Billionaire’s Portfolio, where you look over my shoulder as I follow the world’s best investors into their best stocks.  Our portfolio more than doubled the return of the S&P 500 in 2016.  You can join me here and get positioned for a big 2017.