post election rally in stocks suggests that Trump’s governance will be different than his campaign rhetoric. despite much financial and economic concern about a Trump presidency, market participants back their views financially and are therefore a good indicator of future conditions.

Stocks seem to be pricing in higher likelihood of Clinton win. Two factors:

  1. less uncertainty (potential Trump policy initiatives are more uncertain)
  2. Clinton tax policy seems to leave corporations alone (while increasing taxes on very high earners)


Invest in world-changing companies, and they can change YOUR world

Amid much skepticism about the prospects of high risk stocks (Tesla comes to mind), you may be inclined to lose sight of such companies’ enormous potential. Yes, there’s greater risk (and the need to have a long term time horizon), but (of course) greater reward. And the reward may well justify the increased risk (and by a large margin at that).

Consider experiencing world change not merely as a consumer, but also as a business owner (stock holder)…with its great potential rewards.

Carefully consider any prospective investments in high risk stocks, but realize that such companies have the potential to change not only the WAY you consume, but your consumption ABILITY as well.

Corporate Pay Raises Suggest Wage Growth Trend Sustainable

Corporate executives tend to be well-informed, well-connected (these two go together) and keenly aware of the importance of PR. The recent announcements of pay hikes from Starbucks and J.P. Morgan suggest that corporate leaders may see wage increases as inevitable (knowledge gained from being well informed). And if this is the case, they seem to be trying to gain PR points by announcing pay hikes ahead of market forces that will require them to pay their employees more in the near future anyways.

Bottom Line: wage growth trend looks sustainable (and may accelerate)


Phase Two Of Commodities Super Cycle To Be About Investment Demand?

The previous decade’s great bull market in commodities was characterized by surging demand from emerging markets and has been said to have ended on both reduced growth in that demand and the supply response to higher prices (suppliers producing greater quantities to capitalize on higher prices). Fair enough.

However, commodities demand has multiple sources. It could come in the form of economic demand and/or investment demand (inspired by investors seeking a way to hedge and/or profit from inflation).

And while economic demand may well remain subdued on account of secular global economic malaise, potential forthcoming policy responses (money creation) to such economic weakness may well spur a huge increase in commodities investment demand due to investors’ increased concern for the prospects of long-term inflation risk. And given the post-Great Recession economic recovery’s fragility (highlighted by the current growth scare) and global central banks’ repeated ability/willingness to try and prop things up with intervention (created money), indefinite continuation of such policies seem quite possible (if not likely).

And while it is true that commodities supply has increased in recent years in response to higher prices, the current multi-year correction in prices seems likely to contain (if not end) this supply response.

Besides, increased supply could well be swamped by the trillions of dollars (and counting) worth of globally created money.

Perhaps we could see a scenario that (approximately) repeats the stagflation of the 1970’s – stagnant economic growth coupled with higher inflation/higher commodities prices.

Like last decade, the current long-term prospects for commodities seem quite bright on account of surging demand – but this time it may be a different kind of demand.

Junk Bonds Credit Risk Back In Play?

It seems markets are now catching on to the fact that the European economy continues to weaken (if not accelerate downward) and that the “blessing” of lower commodities prices was not a cause for optimism, but rather an effect of commodities markets’ lower expectations of future global economic growth (including that of the US, whose economy seems likely to be pulled down along with its global counterparts).

But there hasn’t seemed to be much talk of the effect of these developments on the junk bond market, particularly credit risk.

Given the potential for interest rates to fall in a slower growth environment (not to mention the potential for lower rates on central bank intervention – asset purchases of debt), the recent sharp fall in junk bond prices would seem to be mainly on increased concerns of potential defaults (credit risk).

The not-so-long-ago notion that high-yield default risk is off the table now seems quite questionable.

Lower Guidance May Be Theme For Earnings Season

Given continued/accelerating European economic weakness and widespread weakness among the most recently reported US data (manufacturing, services, consumer confidence, construction and executive confidence), the key takeaway from the upcoming earnings season may be companies’ forward guidance.

Last quarter’s earnings seem likely to be quite strong, but the prospect of Ex-US economic weakness spreading throughout the world (or at least the perceived possibility/probability of such in the eyes of corporate executives) could cause the third quarter earnings season to be more about the windshield (the future) than the rear-view mirror (the past).