Recycle

May 14, 2019 - Published by IAG Wealth Partners

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Reduce. Reuse. Recycle.

At my house the recycling bin is often more full than the garbage bin when the carts are rolled out to the curb for collection. We use our plastic grocery bags to clean up after the cats and dog. Unfortunately, reduce is a far more elusive objective with three kids. If anything we are ducing instead of reducing.

The simplistic reduce, reuse, and recycle motto is intended to make you feel good about making a small difference in managing our planet’s resources.

Using this same motto, the stock market has created a hostile environment for stock traders over the last week:

  • Reduce stock prices
  • Reuse last year’s rationale
  • Recycle the recession rumor

Many traders have been mesmerized by the political theater that is designed to capture their thoughts and boost the President’s hopes of re-election next year.

Every hero needs a nemesis, and it appears that the President has selected China as his primary nemesis.

China can’t out-tariff us. They have the weaker hand because they import so little from the United States. China can outpatience us. They do not have an election next year (or any scheduled for that matter).

However, tariffs take a toll economically. A reduction in exports to the United States will hurt China’s economic growth and test their patience. Can they stimulate their economy to offset this headwind until at least January 2021 when a new President could be in place? Or will they be more inclined to strike a trade deal to reduce that risk?

The President is betting that the former makes him a hero during the 2020 presidential campaign — “China does not want me re-elected! A vote for my opponent is a vote for China.” He is also betting the latter makes him a hero – “I made trade fair again.”

But today traders are concerned about the economic impact on the United States, and they currently believe that the Federal Reserve will need to cut its target interest rate by October to stave off an economic slowdown. Traders are betting there will be negative unintended consequences of a trade war which will create victims instead of heroes.

Thus, traders have reduced stock prices by selling more than buying, reused the trade fears as the rationale, and recycled the recession rumor.

At IAG we understand that the spectacle of theater can be alluring, but our disciplined investment and financial planning processes focuses entirely on deflecting your and your family’s nemeses while building toward your future goals.

We don’t think we are heroes. We simply provide long-term advice in a very short-term theater production world.

Quote of the week:  Daniel Kahneman: “The core of the illusion is that we believe we understand the past, which implies that the future also should be knowable, but in fact we understand the past less than we believe we do.”


Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through IAG Wealth Partners, LLC, (IAG) a registered investment advisor and separate entity from LPL Financial.

Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein.

Federal Reserve interest rate information from CME FedWatch Tool.

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