To Mourn and Warn
As I am mesmerized by the procession and funeral of Queen Elizabeth II, I have to hand it to the Brits. This was as majestic a sendoff as you will ever see. The love they still have for their monarchy to me is impressive. A throwback to centuries old traditions is something to behold and to watch something we will probably never see again is very moving. The BBC coverage has been an example for every network on the planet to emulate. No Hoda talking about nonsense. No Savanah Guthrie spewing tales she knows nothing about. Just British broadcasters quietly informing the protocols and stepping aside and letting the moment be the focus. Talk about class.
We have lost Presidents and have never done it like the Brits. The only ceremony that came even close was when John F Kennedy was laid to rest and while I vaguely remember it. I do recall some of it and it seemed like royalty was being mourned. It was a horrible moment in this country’s history and they did the best they could to show respect to a fallen President. To a stricken family.
The World surely has been watching and a lot could be learned from the British but the fact remains that the British Monarchy is still a venerable institution within Great Britain but also throughout the Commonwealth and I firmly believe that is a good thing.
The next thing we should watch is the Fed’s announcement on Wednesday about interest rates. Surely, it won’t have the glamor and pageantry of a state funeral but it still will be historic (sort of). The expectation is that Fed Chairman Jerome Powell will announce a 75 basis point rise in the Fed Funds rate. I am in the majority here and expect that as well. Anything different will rock markets but like every major announcement, those shock waves will last a short time and markets will resume a path based on earnings (which start shortly) and projections. As it should be.
The economy is slowing but yet there are still some bright spots. Consumer confidence is fairly strong. Unemployment is pretty strong as well. Retail sales, which should be tanking, have not and consumer debt has ticked up (ultimately not a good thing but it shows people are continuing to spend).
Looking at the market now and where I think it’s heading I am going to make a safe assumption that the Fed will raise rates by 75 BPS. I am going to go out of a ledge here and say we are very close to a near term bottom. I am looking for 3810 on the S&P and bouncing off of there.
The market has corrected itself with the expectations of a modest earnings season and any surprises will be amplified because pricing is a lot closer to a fair value point. With that in mind volatility will be milder and trends will be easier to discern.
In other words, we are going to be entering a period of clarity (investing wise) that we haven’t seen since the Trump Administration. Corporate earnings will be met and future expectations will be tempered down so we will be in a period of low, steady growth for the foreseeable future.
Does that mean that there will be a zero chance of recession? No. I think a very mild recession is possible and very probably but stock prices will hold up fairly well considering. You don’t see too many periods where we are in a recession and stocks don’t get hit. This will be one of them.
As you well know, this could change at any time but given the strengths of the economy and the weaknesses as well, we are in a period of possibly 1% GDP growth for the next few quarters. This is where investors really need to dig a little deeper and find those shining lights that haven’t already burnt themselves out (energy, for example). I am not going to push anyone in any one direction because as I have said countless times, I don’t want to be one of the countless know it alls that actually know nothing.
Hail Britannia and a transparent Fed!