Monthly Archives: January 2017

Covenant Weekly Market Synopsis as of January 20, 2017

January 23, 2017

In contrast to a huge week in politics that ended with the peaceful transition of power to the new administration, markets were fairly quiet and that is a good thing. Most developed market indices ended marginally lower, while the yield on the long end of the Treasury Curve rose by a handful of basis points. Crude oil prices were volatile, but ended the week up 0.4% at $53.22 per barrel. Precious metals continued to move higher; gold (+5.5%) and silver (+7.3%) are the best performing assets early in 2017.

For a detailed view of weekly, month-to-date and year-to-date asset class performance please click here.

Correlation Crash: Since the Financial Crisis active investment managers have been severely challenged to beat their respective benchmarks, particularly in the last few years. For the most part, this period has been dominated by a unidirectional market characterized by low volatility and low dispersion.  Volatility and dispersion are key ingredients for success in actively managed strategies, be they long-only or relative value hedge fund strategies.

· Volatility is the magnitude of a financial security’s price movements (up or down)

· Dispersion is the degree to which financial securities move relative to each other and is the flipside of correlation (i.e. low correlation usually equates to high dispersion, and vice-versa).

An ideal market for active managers is one characterized by moderate volatility and high dispersion as this environment increases the number of mispriced securities and leads to an increased number of potentially profitable trades. As the following chart highlights, measures of correlation have recently fallen off a cliff leading to increased dispersion.

image

Sources: Bloomberg, Morgan Stanley Research

The chart is a composite measure of regional correlations (e.g. US vs. EAFE stocks), cross-asset correlations (e.g. stocks vs. bonds) and individual stock and currency correlations. The historical decline in correlations is an unequivocally positive development for active managers because markets and securities are finally moving independently. Against a backdrop of stretched valuations and indications we are at the latter stages of the current business cycle, active managers with the flexibility to invest long and short across various asset classes should have a particularly ripe opportunity set ahead.

 

Inflation and Employment: With the headline unemployment rate hovering below 5% and job gains averaging around 189,000 per month, the topic of wage-push inflation has become increasingly popular.

“Wage-push inflation” is a general increase in the cost of goods and services resulting from an increase in wages. Rising wage trends can occur for a number of reasons, but they are generally associated with a tight labor market in which employers must compete for scarce labor. With a low unemployment rate and the recent 2.5% earnings increase (year-over-year) for hourly workers, the wage-push debate has grown louder. However, the relationship between the labor market and inflation is much weaker than most believe. In a speech to the Stanford Institute for Economic Policy Research last week, Fed Chair Yellen illustrated this point.

image

Source: Board of Governors of the Federal Reserve System

The Unemployment Gap (dotted black line) is a measure of labor market tightness which compares the current unemployment rate to the theoretical rate at which further labor gains should increase inflationary pressures. Core PCE (Personal Consumption Expenditures, shown as the red solid line) is the Fed’s preferred measure of inflation. The yellow shaded areas in the chart highlight those periods of time in which the Unemployment Gap was negative. The takeaway from the chart is that even though the Unemployment Gap has been negative on several occasions, inflation rose little, if at all. This is yet another reason we believe inflationary pressures will remain subdued in the economy, even if there is a short move higher in the readings over the next few months as annual comparisons incorporate weak data from early last year.

 

Weekly Economic Data Summary: The Consumer Price Index showed a 2.1% rise in annual inflation for December (vs. 1.7% in November), led by a 1.5% increase in energy prices. Core CPI, which excludes food and energy prices, came in at 2.2% year-over-year, right in the middle of the 1.5% to 2.5% range it has maintained since 2011. Housing starts increased by an above-expectations level of 11.3%. This is a volatile series, and while the longer-term trend is supportive for housing, it does not indicate that the sector is about to breakout to the upside.

Be well,

Jp.

Covenant Weekly Market Synopsis 1.20.17

January 20, 2017

In contrast to a huge week in politics that ended with the peaceful transition of power to the new administration, markets were fairly quiet and that is a good thing. Most developed market indices ended marginally lower, while the yield on the long end of the Treasury Curve rose by a handful of basis points. Crude oil prices were volatile, but ended the week up 0.4% at $53.22 per barrel. Precious metals continued to move higher; gold (+5.5%) and silver (+7.3%) are the best performing assets early in 2017.

For a detailed view of weekly, month-to-date and year-to-date asset class performance please click here.

Correlation Crash: Since the Financial Crisis active investment managers have been severely challenged to beat their respective benchmarks, particularly in the last few years. For the most part, this period has been dominated by a unidirectional market characterized by low volatility and low dispersion. Volatility and dispersion are key ingredients for success in actively managed strategies, be they long-only or relative value hedge fund strategies.

  • Volatility is the magnitude of a financial security’s price movements (up or down)
  • Dispersion is the degree to which financial securities move relative to each other and is the flipside of correlation (i.e. low correlation usually equates to high dispersion, and vice-versa).

An ideal market for active managers is one characterized by moderate volatility and high dispersion as this environment increases the number of mispriced securities and leads to an increased number of potentially profitable trades. As the following chart highlights, measures of correlation have recently fallen off a cliff leading to increased dispersion.

Sources: Bloomberg, Morgan Stanley Research

The chart is a composite measure of regional correlations (e.g. US vs. EAFE stocks), cross-asset correlations (e.g. stocks vs. bonds) and individual stock and currency correlations. The historical decline in correlations is an unequivocally positive development for active managers because markets and securities are finally moving independently. Against a backdrop of stretched valuations and indications we are at the latter stages of the current business cycle, active managers with the flexibility to invest long and short across various asset classes should have a particularly ripe opportunity set ahead.

Inflation and Employment: With the headline unemployment rate hovering below 5% and job gains averaging around 189,000 per month, the topic of wage-push inflation has become increasingly popular.

“Wage-push inflation” is a general increase in the cost of goods and services resulting from an increase in wages. Rising wage trends can occur for a number of reasons, but they are generally associated with a tight labor market in which employers must compete for scarce labor. With a low unemployment rate and the recent 2.5% earnings increase (year-over-year) for hourly workers, the wage-push debate has grown louder. However, the relationship between the labor market and inflation is much weaker than most believe. In a speech to the Stanford Institute for Economic Policy Research last week, Fed Chair Yellen illustrated this point.

Source: Board of Governors of the Federal Reserve System

The Unemployment Gap (dotted black line) is a measure of labor market tightness which compares the current unemployment rate to the theoretical rate at which further labor gains should increase inflationary pressures. Core PCE (Personal Consumption Expenditures, shown as the red solid line) is the Fed’s preferred measure of inflation. The yellow shaded areas in the chart highlight those periods of time in which the Unemployment Gap was negative. The takeaway from the chart is that even though the Unemployment Gap has been negative on several occasions, inflation rose little, if at all. This is yet another reason we believe inflationary pressures will remain subdued in the economy, even if there is a short move higher in the readings over the next few months as annual comparisons incorporate weak data from early last year.

Weekly Economic Data Summary: The Consumer Price Index showed a 2.1% rise in annual inflation for December (vs. 1.7% in November), led by a 1.5% increase in energy prices. Core CPI, which excludes food and energy prices, came in at 2.2% year-over-year, right in the middle of the 1.5% to 2.5% range it has maintained since 2011. Housing starts increased by an above-expectations level of 11.3%. This is a volatile series, and while the longer-term trend is supportive for housing, it does not indicate that the sector is about to breakout to the upside.

Be well,

Jp.

Covenant Weekly Market Synopsis as of January 13, 2017

January 16, 2017

The Trump reflation trade lost some steam last week (and more this morning), although it is worth noting that broad equity indices in the U.S. and internationally have already posted gains of around 2% or better thus far in 2017. The yield on US Treasuries declined a titch, in a continuation of the moderating yield trend that began the day after the Fed raised rates by 0.25% on December 15. Since then the yield on the 10-year bond has declined to 2.40% (from 2.60%), while the long bond (the 30-year bond) has declined to 2.99% (from 3.18%). Evidently the “smart money” doesn’t yet believe in the narrative that excessive inflationary pressures are building in the economy.  It is also worth noting the yield curve has been flattening recently (the chart below illustrates the spread between UST 30 year bonds and UST 2 Year bonds), defying expectations that Trump’s policies will create inflation and higher long-term yields. This is a volatile series and not too much should be read into a short data set, except that a continuation of this trend would create a headwind for bank earnings who generate much of their lending profits by capturing the yield differential between borrowing money at the short end of the curve and lending it at the long end (e.g. through mortgage lending). As the longer-term chart shows, the yield differential remains compressed compared to the last seven years, and the recent rally in banking stocks was predicated largely on a belief that this spread will widen under Trump’s administration.

image

Source: Bloomberg

For a detailed view of weekly, month-to-date and year-to-date asset class performance please click here.

 

Game On! – This Friday, president-elect Trump will officially take the reins of the most powerful nation in the world. From a financial perspective, he will inherit an economy that is on decent footing, but has yet to achieve sustained growth above 3% per year. There is no shortage of forecasts, bearish and bullish, of how Trump’s intended policies will affect the economy, and by extension, financial markets. Below are a few examples of the divergent views being expressed by thoughtful economists and experienced investors (Source: Barron’s):

The Skeptics

  • “Tax reform will take time, probably passing late this year. The economic impact of reduced regulations, higher infrastructure spending, and particularly tax reform won’t be felt until 2018” – Charles Krauthammer, Washington Post.
  • “Tax cuts work slowly and could backfire if they add to the budget deficit, deepening the deleterious effect of debt loads on growth….Similar to the fiscal stimulus package launched in 2009, “… the rush to judgment was misplaced, as widespread economic gains did not occur, and the U.S. experienced the weakest expansion in seven decades, along with lower inflation” – Lacy Hunt, Hoisington Investment Management.” – Lacy Hunt, Hoisington Investment Management.
  • “Higher dollar and higher interest rates will likely slow domestic economic growth and a related repricing of risky assets.” – Sephanie Pomboy, MacroMavens.

 

The Believers

  • “…Small business owners reported a much brighter outlook for the economy and higher expectations for their businesses.” – Bill Dunkelberg, Chief Economist of the National Federation of Independent Business
  • “Consumer sentiment is near a 12-year high and back to levels last seen before the Great Recession…” – Joshua Shapiro, chief U.S. economist at MFR.
  • Investor Sentiment is high…bullish investors are at 58.6% and bearish sentiment declined to 18.3%.” – Investors Intelligence
  • “Fiscal stimulus and broad-based deregulation are expected to jolt the U.S. economy toward a long-term equilibrium of higher growth, inflation and interest rates.” – Deutsche Bank

 

The dramatic rise in equity markets since the election indicates that the “Believers” represent market consensus. Investing in line with consensus views (though comfortable) has its drawbacks, as much of the potential investment gains from those views may have already been priced into the market (i.e. the Efficient Market Hypothesis). It is therefore axiomatic that if reality veers from consensus expectations, investment losses will outweigh potential future gains.

So what are the current consensus investment themes? Several of them are listed below along with a matching non-consensus view expressed by Seinfeld’s George Costanza, who has decided to do the opposite of what he would normally do.

image

Sources: John Hancock and Covenant Investment Research

While George is confident in his views (because “A George, divided against itself, Cannot Stand!”), Covenant’s Chief Compliance Officer will be pleased that none of the above is intended as investment advice or a forecast of future investment returns.  That being said, a properly diversified portfolio which combines exposure to traditional asset classes with non-correlated investment strategies (e.g. hedge funds, private equity, natural resources, private lending, etc.) should enable investors to participate in upside should the consensus views prove correct, while mitigating downside risk in the event the masses are wrong.  Over a full business cycle, through the “magic” of compounding, a portfolio that exhibits lower downside volatility can outperform a portfolio with concentrated risks in one or two return drivers.

 

Weekly Economic Data Summary: The November Job Opening and Labor Turnover (JOLT) report (which is always issued with a one-month lag) supports our belief that the labor market is maturing and the best days of hiring are behind us. Job Openings (currently at 5.5mm) peaked in April ’16 at 5.8mm and have been slowing since then. The headline Retail Sales number of 0.6% for December was deceptively strong, boosted by a jump in year-end incentives on automobiles and higher gasoline prices. Control Group Sales (which excludes autos and gasoline) rose only 0.2% vs. expectations of a 0.4% increase.

Be well,

Jp.

Covenant Weekly Market Synopsis 1.13.17

January 13, 2017

The Trump reflation trade lost some steam last week (and more this morning), although it is worth noting that broad equity indices in the U.S. and internationally have already posted gains of around 2% or better thus far in 2017. The yield on US Treasuries declined a titch, in a continuation of the moderating yield trend that began the day after the Fed raised rates by 0.25% on December 15. Since then the yield on the 10-year bond has declined to 2.40% (from 2.60%), while the long bond (the 30-year bond) has declined to 2.99% (from 3.18%). Evidently the “smart money” doesn’t yet believe in the narrative that excessive inflationary pressures are building in the economy. It is also worth noting the yield curve has been flattening recently (the chart below illustrates the spread between UST 30 year bonds and UST 2 Year bonds), defying expectations that Trump’s policies will create inflation and higher long-term yields. This is a volatile series and not too much should be read into a short data set, except that a continuation of this trend would create a headwind for bank earnings who generate much of their lending profits by capturing the yield differential between borrowing money at the short end of the curve and lending it at the long end (e.g. through mortgage lending). As the longer-term chart shows, the yield differential remains compressed compared to the last seven years, and the recent rally in banking stocks was predicated largely on a belief that this spread will widen under Trump’s administration.

For a detailed view of weekly, month-to-date and year-to-date asset class performance please click here.

Game On! – This Friday, president-elect Trump will officially take the reins of the most powerful nation in the world. From a financial perspective, he will inherit an economy that is on decent footing, but has yet to achieve sustained growth above 3% per year. There is no shortage of forecasts, bearish and bullish, of how Trump’s intended policies will affect the economy, and by extension, financial markets. Below are a few examples of the divergent views being expressed by thoughtful economists and experienced investors (Source: Barron’s):

The Skeptics

  • “Tax reform will take time, probably passing late this year. The economic impact of reduced regulations, higher infrastructure spending, and particularly tax reform won’t be felt until 2018” – Charles Krauthammer, Washington Post.
  • “Tax cuts work slowly and could backfire if they add to the budget deficit, deepening the deleterious effect of debt loads on growth….Similar to the fiscal stimulus package launched in 2009, “… the rush to judgment was misplaced, as widespread economic gains did not occur, and the U.S. experienced the weakest expansion in seven decades, along with lower inflation” – Lacy Hunt, Hoisington Investment Management.” – Lacy Hunt, Hoisington Investment Management.
  • “Higher dollar and higher interest rates will likely slow domestic economic growth and a related repricing of risky assets.” – Sephanie Pomboy, MacroMavens.

The Believers

  • “…Small business owners reported a much brighter outlook for the economy and higher expectations for their businesses.” – Bill Dunkelberg, Chief Economist of the National Federation of Independent Business
  • “Consumer sentiment is near a 12-year high and back to levels last seen before the Great Recession…” – Joshua Shapiro, chief U.S. economist at MFR.
  • Investor Sentiment is high…bullish investors are at 58.6% and bearish sentiment declined to 18.3%.” – Investors Intelligence
  • “Fiscal stimulus and broad-based deregulation are expected to jolt the U.S. economy toward a long-term equilibrium of higher growth, inflation and interest rates.” – Deutsche Bank

The dramatic rise in equity markets since the election indicates that the “Believers” represent market consensus. Investing in line with consensus views (though comfortable) has its drawbacks, as much of the potential investment gains from those views may have already been priced into the market (i.e. the Efficient Market Hypothesis). It is therefore axiomatic that if reality veers from consensus expectations, investment losses will outweigh potential future gains.

So what are the current consensus investment themes? Several of them are listed below along with a matching non-consensus view expressed by Seinfeld’s George Costanza, who has decided to do the opposite of what he would normally do.

Sources: John Hancock and Covenant Investment Research

While George is confident in his views (because “A George, divided against itself, Cannot Stand!”), Covenant’s Chief Compliance Officer will be pleased that none of the above is intended as investment advice or a forecast of future investment returns. That being said, a properly diversified portfolio which combines exposure to traditional asset classes with non-correlated investment strategies (e.g. hedge funds, private equity, natural resources, private lending, etc.) should enable investors to participate in upside should the consensus views prove correct, while mitigating downside risk in the event the masses are wrong. Over a full business cycle, through the “magic” of compounding, a portfolio that exhibits lower downside volatility can outperform a portfolio with concentrated risks in one or two return drivers.

Weekly Economic Data Summary: The November Job Opening and Labor Turnover (JOLT) report (which is always issued with a one-month lag) supports our belief that the labor market is maturing and the best days of hiring are behind us. Job Openings (currently at 5.5mm) peaked in April ’16 at 5.8mm and have been slowing since then. The headline Retail Sales number of 0.6% for December was deceptively strong, boosted by a jump in year-end incentives on automobiles and higher gasoline prices. Control Group Sales (which excludes autos and gasoline) rose only 0.2% vs. expectations of a 0.4% increase.

Be well,

Jp.

Covenant Weekly Market Synopsis as of January 6, 2017

January 9, 2017

Risk assets got off to a good start in the first week of trading. Domestic, international and emerging market stocks all moved higher by around 2%, shaking off some of the softness witnessed in the final week of 2016. The yields on US Treasury bonds were volatile (expect a lot of that this year), but ended the week slightly lower (as the prices on the bonds increased marginally). The commodity complex also participated in the rising tide as precious metals, copper and crude prices all increased. The US Dollar was flat on the week, while the VIX Index (a measure of expected equity market volatility) was the poster-child for complacency as it was slammed down to 11.3 (a 19.4% decline on the week).

For a detailed view of weekly, month-to-date and year-to-date asset class performance please click here.

Inflated Inflation Concerns – The inflation drum is being beaten louder and louder in catchy headlines authored by various financial publications and bloggers. In all likelihood, they will be proven right….but only in the short-term. That is to say, the widely cited Consumer Price Index (CPI), which currently stands at 1.7% year-over-year growth, will shoot through 2% in the coming months as we lap weak energy data from early last year. This move will surely cause volatility in fixed income investments and other interest-rate sensitive investments, as many will extrapolate the short-term spike into a longer-term trend. But this will be a mistake, and a welcome one to nimble traders and investors with a more informed long-term view on the structural issues working against pronounced inflation. The CPI is heavily influenced by temporary (referred to as “transitory” in Fed speak) factors such as the price of oil, which introduces excessive volatility to the data series. Core CPI, which strips out energy (and food) prices, is a more stable data series and has proven to be a better predictor of inflationary trends. As such, Core CPI is worth keeping an eye on and it remains just a hair over 2%, per the following chart from FTN Financial.

image

According to the minutes from the most recent FOMC meeting in December, the Fed is pretty relaxed about inflationary pressures. The Fed sees a modest upward bias, through 2017, but “…inflation was projected to be marginally below the Committee’s longer-run objective of 2% in 2019” (Source: Fed staff outlook). The bottom line is the longer-run data doesn’t support the short-term media narrative that inflation is poised to get out of hand.

But what about Trump’s fiscal stimulus – won’t that cause inflation to increase above 2% on a sustained basis? We don’t think so and neither does the Fed. Several FOMC members considered a stimulus package in their long-run inflation forecasts, but it didn’t move the needle significantly. Keep in mind that the Fed will move rates higher to counteract the inflationary effects of fiscal stimulus should it be judged that the economy is overheating… so that becomes a zero-sum game, or something close to it as it relates to inflation.

To be clear, inflation is present in the economy, and that is a good thing. Yet, inflation well in excess of 2% on a sustained basis is unlikely in the next couple of years. This view will be covered in more detail in our Q1 2017 Quarterly Economic Review & Outlook that will be distributed towards the end of the month.

Near Term Tax Reform Unlikely – Since the election the markets have ripped higher, propelled by expectations of fiscal stimulus, deregulation, and tax reform. Stocks are seemingly priced to perfection on expectations that this prosperity-trifecta will be implemented both at the magnitude advertised during the campaign and within a short timeframe. Over the last week I have heard from a D.C. insider/lobbyist and a politically-savvy economist that a vote on tax reform will not come until late 2017 or perhaps 2018. The reason for the extended timeframe is that the Democrats will be doing everything in their power to drag their feet and delay appointments in the Federal Reserve, courts and cabinet. This process must be completed before Congress can turn their attention to their normal business of lawmaking, and then their first priority will be to replace the Affordable Care Act. So while market expectations are for a quick realization of the prosperity-trifecta, there is ample room for disappointment as one or more of the key initiatives are either delayed or watered-down.

Weekly Economic Data Summary: The New Year began with a very positive week for economic data. The December ISM Manufacturing Index reached a two-year high rising to 54.7 (from 53.2 in November). It was a very solid report with increases in new orders, production and prices paid. The recent acceleration in the US Dollar is bound to hurt exporters, but nevertheless it was a solid report to end the year – hopefully, the momentum can be maintained in 2017. The December ISM Non-Manufacturing Index held steady at 57.2, solidly above the 50.0 reading that demarcates expansion vs. contraction. The December payroll report revealed mostly good news, with the addition of 156k jobs and an acceleration in wages. The Unemployment Rate ticked up to 4.7% (from 4.6%) as more people entered the Labor Force (a good thing for future economic growth, assuming they are hired).

 

Be well,

Jp.

Covenant Weekly Market Synopsis as of December 30, 2016

January 2, 2017

Like most years, 2017 is starting with an optimistic tone…. and why not?  Uncertainty regarding the presidential election has been replaced with anticipation of a more business-friendly administration characterized by lower taxes and less regulation.  In response, the S&P 500 rocketed 7.9% post-election to finish the year the year up 12.0% (including dividends).  Small capitalization stocks (as measured by the Russell 2000 Index) had an even better finish, rallying 17.3% to end the year up 21.3%.

Will that optimism prove to be prophetic, or will it follow the same fate as the billions of New Year’s Resolutions that sound so good in theory, but are so difficult in practice and later abandoned as the year wears on?  We will begin to learn more later this month when Trump is inaugurated, kicking-off the critical “First 100 Days” in office.  At that point a theoretical Trump Presidency will become a practicing one, Tweets and all.

In comparison to US stocks, developed market indices outside of the US did not fare as well in 2016, continuing a multi-year trend of underperformance. When priced in US dollars, the EAFE Index (Europe, Australasia and Far East stocks) rose only 1.1%, while the Nikkei Index (Japanese stocks) increased by 5.9%, dragging on the performance of diversified equity portfolios.

For a detailed view of weekly, month-to-date and year-to-date asset class performance please click here.

 

Irrespective of the market’s recent performance and the general hope that Trump will make the country (and by extension, the economy) great again, we remain focused on the data. And the data regarding the health of the consumer is starting to show early warning signs of a potential slowdown in consumption, as reported by Foleynomics. Since consumption makes up roughly 70% of Gross Domestic Product, trouble in consumer land would spell trouble for the rest of the economy as well. Indeed, absent the consumer, GDP growth over the past year would have been close to negative as the vast majority of other economic sectors have been stagnant or contracting. This is not a call that the economy is in imminent danger, but consider the following four trends related to consumption:

1. After peaking at 5.7% in mid-2015, real year-over-year personal income growth is slowing into the 1% – 2% range. This is consistent with a mature labor market and limited wage gains.  Slowing income growth eventually leads to lower consumption levels, absent a reduced savings rate or increased borrowing, neither of which can continue indefinitely.

image

Sources: Bureau of Labor Statistics, Foleynomics and Covenant Investment Research.  Note there is a big distortion in the 2012 – 2013 data in this and the following two slides due to Obamacare Tax hikes and income timing strategies. Ignore that period please.

 

2. Personal Consumption Expenditures (PCE) have outpaced Disposable Personal Income (DPI) since August. As the chart shows, this is not a sustainable condition in the long-run.  Either wages must increase or consumption will decline as consumers do not have unlimited savings or credit resources to finance spending in excess of earnings.

image

Sources: Bureau of Economic Analysis, Foleynomics and Covenant Investment Research

 

3. Speaking of savings, the Personal Savings Rate (as a percent of Disposable Personal Income) has been declining since Q1 2016.  Just as a higher savings rate can serve as a “store of value” for future consumption, depleted savings levels will detract from future consumption.

image

Sources: Bureau of Economic Analysis, Foleynomics and Covenant Investment Research

 

4. Consumer credit growth is outpacing income growth when consumer debt levels are at an all-time high. Indeed, credit growth has outpaced disposable personal income for 53 months, which is just shy of the record 59 months set in the late 90’s into the early 2000’s.

image

Sources: Bureau of Economic Analysis, Foleynomics and Covenant Investment Research.

 

If consumption is plateauing, or has already peaked, it will be tough sledding ahead for the new administration. Likewise, investors are now confronted with the challenge of assessing the likelihood of Trump’s campaign promises being implemented, the timing for doing so, and their ultimate impact on the many structural issues affecting the US economy (an aging demographic, high debt levels, etc.).   It’s just about “go time” for Team Trump and with modest economic growth of 2-3% domestically combined with a weak global economy, there is little margin for error in fiscal and monetary policies.  It promises to be an interesting year and equity markets are likely to experience a lot more volatility than in the recent honeymoon period since Trump was elected as these various forces play out.

Be well,

Jp.