Economic Outlook

Equity Markets Nosedive as the Plug Is Pulled On the Economy

By Mitchell Anthony April 10, 2020 The S&P500 fell 19.6% in Q1 2020 compared to a loss of 11.1% for MACM’s Dynamic Growth Non-Qualified portfolio. The US Economy has deflated after orders from Washington and the States as the coronavirus rips its way across America and the globe. The US economy was unplugged just as stronger growth was beginning to emerge after a long period of modest growth since the great recession.  Indeed pre-virus economic trends in the US economy were quite good.  Housing was experiencing some of the best data it had seen in many quarters. Consumer spending on housing, digital devices, and experiences was accelerating. Energy prices were stable and the Fed’s balance sheet was declining. Employment was at all-time highs and mortgage delinquencies at all-time lows. Consumer confidence was near all-time highs and consumer balance sheets were strong. The banking system was solid and corporate America had healthy balance sheets. There was no overcapacity in the economy and asset prices were higher across almost all asset classes. So in other words a very bad time opportunistically to have shut down the economy.Read more

Coronavirus Forces Hand of Government Leaders

March 18, 2020   By Mitchell Anthony   Unfortunately this virus and its ability to spread and penetrate the globe was misunderstood by us and by most investment managers worldwide.  While the world watched selective footage of the virus grip China it was unclear what was being done in China to prevent and contain the spread of the virus and how America would have to react if the virus reached American shores.  Historically coronaviruses that began in China never reached the rest of the globe in a significant manner.  However this time the virus has spread quickly across the globe and threatens human life.  As a result the globe has taken a very defensive posture against the virus.   Government and corporate leaders across the globe have had to weigh the impact of the virus on human life versus the impact of extreme defense measures on economic activity.  Thus far economic survival has fallen and given way to maintaining human health around the globe.  Historically capitalists have sacrificed sometimes almost everything including health for economic and financial gain and prosperity, however in today’s world capitalism has fallen in rank dramatically to our current society’s goals about life and health for humanity. Read more

Coronavirus Update

  The risk of recession continues to rise and as the risk plays out equity markets fall and treasury markets rally.  Stocks generally have fallen almost 20% from their all time highs achieved just a few weeks ago.  Conversely 30 year treasuries have risen almost 15% during that same timeframe as record lows in interest rates are embraced.  The 30 year treasury is now yielding less than 1% and 10 year treasuries are yielding approximately 1/2 of 1%.  If the fear of recession turns into reality treasury yields will undoubtedly move into negative territory across the yield curve and equity prices will possibly fall another 10 to 20%.  Gold has not turned out to be much of a hedge for this recent drop in equity prices.  While gold has done well at times historically during periods of fear gold has now become a bit more of a commodity used in jewelry and hence tied to economic strength.  As recession is embraced investors are less thrilled with gold. Treasuries are a much better hedge for inflation then gold it would appear.Read more

Markets Advance as US Economy Ebbs

The US equity markets moved counter to the economy and the bond markets in the fourth of 2019. US equity markets had their best quarter in years as the S&P 500 advanced 9% and MACM’s dynamic growth portfolio (DG) and diversified equity (DE) advanced 11.9% and 12.9% respectively.  The rally was rooted in several beliefs that grew deeper in the minds of investors as the quarter unfolded. The attacks on capitalism by liberal Democrats began to wane as Warren and Sanders retreated from their strong rhetoric of tearing apart corporate American superstars like Amazon, Facebook, Apple, Google, and Netflix.  The trade picture also improved during the quarter as a deal was struck with the Chinese that would be incorporated in two phases.  While trade has really not impacted the economy in America it has slowed the Asian economies dramatically and hurt global growth.  These manufacturing areas of the world purchase significant amounts of American industrial equipment and this part of the US economy has been soft for several quarters.  These areas of the economy came to life in the fourth quarter and we also saw Netflix and Amazon return to the top of the leaderboard.Read more

Equity Market Recovery Stalls As Global Condition Ebb

By Mitchell Anthony October 21 2019   US Economy continues to ebb and flow.  The recovery in the equity markets that began in January paused in the third quarter as investors became uneasy with weak economic data on global economic conditions, as well as a deteriorating industrial sector here in America.  The consumer side of the economy remains quite robust and as contributed to optimism that has kept the market on a plateau and gave sellers reason to pause.Read more

Q2 2019 - Markets advanced with defensive leadership

Q2 2019 - Markets advanced with defensive leadership By Mitchell Anthony The US Economy continues to ebb and flow producing steady but below trend growth for several quarters.  This trend seems likely to continue as the economic environment stays extremely stable with low inflation, friendly fed policy, and employment at all-time highs.  The Current trends in the US economy show a mixed picture but generally improving economic fundamentals are visible. Read more

Corporate American Superstars

Corporate American Superstars By: Mitchel Anthony Facebook, Amazon, Apple, Netflix, and Google (The FAANG) have been the pride of corporate America for many years and have been at the top of the list of most growth portfolios.  Their innovation has changed the world and given America reason to be proud of what capitalism can produce.  Every economic cycle has growth leaders but these great companies have set a standard that will be remembered for decades if not centuries to come.  There are always doubters and those that believe the growth leaders in our economy are somehow cheating or taking advantage of consumers of their products.  We have seen this talk in the past and undoubtedly will see it again. The political mess in Washington somehow believes that Facebook, Amazon, and Google should be broken up because they have become too big and powerful and as a result are stifling competition.  This has investors concerned and their stock prices have waned as a result.   Apple is suffering from a different type of political problem.  They are caught up in the middle of a trade war that impacts prices for their products.  As a result the growth outlook for the FAANG has clouds on the horizon.Read more

GLOBALIZATION AND THE TRADE WAR

The news flow over the last few weeks has centered on Trumps attempts to level the playing field with America’s adversaries and partners.  This would include China, Mexico, and much of Europe. The game at play involves global trade and Trumps desire to better position America as a major exporter of goods and services to the emerging middle classes in China, India, and Asia.  Investors are always worried about change and this game at play could put America back into a whole new cycle of amazing growth similar to the nifty 50s.  Thus far we have seen more pessimism rather than optimism. As a result the markets have fallen 5 to 7% on this recent news flow. Synthesizing the right decisions out of these developments is our challenge as we try to stay ahead of where investors will go over the next year as they watch Trump do what he does best - negotiate and deal. Read more

Donald Trump Grows Confident On Re-election

Donald Trump surprised the markets and investors last week when he announced decisions to continue to aggressively battle China and seek significant gains in a trade agreement as his reelection year approaches quickly. Most investors believed that Trump was more concerned about the short-term gains for the economy than the long-term potential that would be derived from a trade agreement.  As a result investors likely believed that Trump would back off the aggressive tone he had taken previously toward the Chinese and either sign a compromised agreement or allow this opportunity to pass. This obviously did not happen. Read more

Equity Markets Rebound

US equity markets rebounded at an amazing pace in the first quarter of 2019.  Historically it has almost been unheard of for equity market corrections of 15% or more to be retraced at the same or better pace than what occurred during the fall.  This is exactly what occurred in the first quarter of this year.  This obviously has us thinking deeply about what was behind the selloff that occurred in the fourth quarter and whether it was in fact a manufactured correction by hedge funds seeking to make enormous amounts of money through a big short.  We hypothesized in January of this year that the selloff in the fourth quarter was likely due to a big short put on by hedge funds and institutional investors and not likely due to fears from investors worried about a substantial change in the economic environment.  This seems to be what primarily occurred.  Now in hindsight there are some other observations that can be made and clearly more data is available about the economic conditions that were the headline news driving markets lower in Q4. Read more