Friday Before Christmas Raises Questions

I’m not “into” politics, but I was disheartened by the resignation of our Secretary of Defense. The open acknowledgement of fundamental differences about US foreign policy creates great uncertainty around the world, in my view. That may very well benefit only those who wish our great nation ill.

The financial markets do not “like” uncertainty. Business leaders around the world are less prone to make big investments in the future when the political and regulatory environment seem unstable. No-one likes the idea that policies, tax rates, regulations or interest rates could take unexpected turns after they make a big bet on the future. So they don’t.

People are less likely to buy goods and services when they are uncertain about their jobs and future prospects. This uncertainty increases when big auto companies downsize and stop making certain products. This contraction in spending, this reduction in optimism, have self-reinforcing effects.

We seem to be at a turning point for our nation and for the world. This may just be another momentary blip in the markets like January of 2018 was. But it may be more.

Since we don’t predict the future in our methodology, we look at the behavior of different asset classes over recent months and respond accordingly. Gold has started an uptrend after a seven year bear market. All other major asset classes are trending down. It is time to be cautious.

Have a blessed Christmas and Happy New Year.

Dale