December 28, 12:00 pm EST

Last year this time, as we ended 2016, and looked ahead to 2017, it was clear that the dominant theme for the year ahead would be Trumponomics.

We had a global economy that had been propped up by central banks for the better part of eight years, and growth that was proving to be dangerously slow — with growing risks of a stall and another downward spiral.

That was clear in the summer of 2016, when global interest rates started to diving deeply into negative territory.  That meant people were happy to pay governments for the security of parking their money in government bonds.

There was a clear lack of optimism about economic conditions and what the future may look like.

That changed with Trump’s election and his commitment to launch an assault on economic stagnation.

It flipped the switch on the lack of optimism that had been paralyzing business activity.  And that optimism has led to a hotter economy this year than most expected, despite the lack of substantial policy action (which we didn’t get until later in the year).

So what will next year look like?

As we discussed yesterday, we have tax cuts that should drive corporate earnings and warrant another double digit year for the stock market (close to 20%).

And that doesn’t take into account the impact to corporate earnings from personal tax cuts, a healthier job market with employees that can command higher wages and companies that are confident to take cash and invest in new projects.  So, by design, we have incentives coming into the economy for 2018 that will boost demand.  And another pillar of Trumponomics, infrastructure, will be the focus early next year, which will fuel more jobs, more economic activity.

All of this and the Fed is projecting just 2.5% growth next year.  And Wall Street and the economist community tend to anchor their forecasts on the Fed.  But the Fed doesn’t have a very good record in forecasting – especially in recent history.

They overestimated growth and the outlook throughout much of the recovery period.  Instead we got stagnation.

But in the past 18 months or so, they flipped the script.  They became the “new normal” believers that we’re in for long-term slower growth.

With that, they underestimated the outlook for 2017, even with the prospects of fiscal stimulus coming (they ignored it, and continue to).  They were looking for 2.1% growth.  It will be closer to 3% for the full year 2017.  And next year, while they are looking for 2.5%, we could have something closer to 4%.  That’s my bet.

Remember, we’ve talked about the fundamental backdrop, with the addition of fiscal stimulus, that could have us in the early stages of an economic boom period.  I think we’ll feel that, for the first time in a long time, in 2018.

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January 30, 2017, 4:00pm EST                                                Invest Alongside Billionaires For $297/Qtr

The Trump agenda continues to dominate the market focus as we entered the second week of Trumponomics.

To this point the market focus has been on the pro-growth agenda.  With that, stocks have been higher, yields have been higher, the dollar has been higher, and global commodities have been broadly rising. Meanwhile, gold (the fear trade) has been falling and the VIX has been falling, toward ultra-low levels.  The VIX, like gold, is a good market indicator of uncertainty and/or fear.

Let’s talk about the VIX…

The VIX measures the implied volatility of options on the S&P 500. This is a key component in the price investors pay for downside protection on their portfolios.

So what is implied volatility?  Implied volatility measures both actual volatility and the options market maker community’s expectations (or perception of certainty) about future volatility.  When market makers feel confident about the stability in markets, implied vol is lower, which makes the price of options cheaper.  When they aren’t confident in stability, implied vol goes up, which makes the price of an option go up.  To compensate those that are taking the other side of your trade, for the lack of predictability, you pay a premium.

With that in mind, on Friday, the VIX traded to the lowest levels since the days before the failure of Lehman Brothers. That indicates that the market had (or has) become a believer that pro-growth policies, combined with ultra-easy central bank policies have created a buffer against the downside in stocks.  But that perception of downside risk is changing today, with the more vocal uprising against Trump social policies.  You can see the spike (in the far right of the chart) today…

So as big money managers were closing the week last Friday, looking at Dow 20,000+ and a VIX sliding toward levels not too far from pre-crisis levels, buying downside protection was dirt cheap. This morning, they’re paying quite a bit more for that protection.

With that said, this pop in the VIX and the Dow trading off by more than 100 points today gets a lot of attention.  But is there justification to think that market turbulence will begin to reflect the turbulence and division in public opinion toward Trump policies?  Just gauging the extent of the market reaction from the VIX today, it’s unlikely.  The chart below is the longer term view of the VIX.

My observations: The VIX has had a small bounce from very, very low levels.  On an absolute basis, vol is still very cheap.  When there is real fear in the air, real uncertainty about the future, you can see from the spikes in the longer term chart above, the premium for the unknown gets priced in quickly and aggressively.  Given that there has been virtually no risk premium priced into the market for any falter in the Trump Presidency, or the execution of Trump policies, the moves today have been very modest. And gold (as I write) is barely changed on the day.

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.

January 27, 2017, 4:00pm EST                                                                                         Invest Alongside Billionaires For $297/Qtr

We’re finishing the first full week under Trumponomics. And it’s been an active one.

It’s clear now that President Trump intends to follow through on his campaign promises. While that’s making waves with the media and with Washington types, it’s creating more certainty about the outlook for growth for the real economy and, therefore, for financial markets.

We close the week with the Dow above 20,000, on new record highs. And as we discussed yesterday, stock markets around the world are rallying too on the prospects of a stronger U.S. economy translating into a stronger global economy. We looked at the charts of Mexican and Canadian stocks yesterday–both of which are sitting on record highs. U.K. stocks are near record highs and German stocks are quickly closing in.

We already know that small business optimism in the U.S. has hit 12-year highs, jumping by the most in since 1980–on Trump’s pro-growth agenda. Today the consumer sentiment report showed sentiment is on the rise too–at 13-year highs.

Let’s talk about the data that we’re leaving behind. Fourth quarter GDP was reported today at just 1.9%. This, more than seven years removed from the failure of Lehman Brothers, an $800 billion stimulus package, seven years of zero interest rates and three rounds of quantitative easing, and the economy is running at about 60% of its normal pace. And even after taking the Fed’s balance sheet from $800 billion to $4.5 trillion, we have inflation running at less than 50% of its normal pace. This malaise is consistent throughout the world. And this is precisely why big, bold fiscal stimulus and structural change is desperately needed, and is being embraced by those that understand the dangers of the stall-speed global economy that has been kept alive by global central bank intervention. As I’ve said, at Dow 20,000, it’s just getting started.

Have a great weekend!

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.