Then ask yourself why yen has been so strong breaking below 100 to the dollar and why the euro has stayed above 111 to the dollar. I can assure you that their strengths are not due to improving economies but investors taking risk off and moving to perceived safe havens.
Is the Fed blind to those risks to the downside overseas? Do they really want to start tapping the brakes here? Are they misguided now as in December when they first raised rates and markets fell?
I just don't believe it!
I continue to believe that the Fed will hold off until there is a better outlook for the global economies. Remember, too, that the United States is the engine of global growth!
The second point that I want to make is that it is time for Janet Yellen and other Fed officials to step up to the plate and start talking about the need for fiscal, tax, trade and regulatory changes in D.C. to support and stimulate the U.S economy. Monetary policy can't do it alone and has gone as far as it should. The baton has to be passed on to our politicians. I hope that Janet Yellen says something constructive next week at Jackson Hole.
Warren Buffett, Mark Cuban and other noted Democrats also need to speak about these issues, too, rather than just putting down Donald Trump and his policies. Do they support Clinton's view of tax, regulations and trade? I doubt it! But they say nothing. We need leadership from broadly respected people on these issues.
We need an overhaul of the tax system, less regulation or, at least, less constant changes in regulations, which has made planning impossible, and free and open trade where offenders are penalized without much delay.
It is clear that fiscal stimulus will increase regardless of who becomes president, but this is only a temporary boost to the economy without substantive changes elsewhere.
So where do this all leave us?
Despite all of my voiced concerns, the United States is best positioned of all the industrialized economies. Yes, there are problems and concerns, but our financial markets will continue to climb the walls of worry.
The truth is that weakness in the dollar, while temporary in our opinion, will help our trade deficit, raise GNP and boost earnings of our multinationals.
I believe that our yield curve will steepen slightly as our economy accelerates despite huge capital inflows from abroad so I continue to overweight financials and have added more cyclical exposure while reducing the "safe" stocks. Buy only market leaders with great managements with sound strategic winning plans for years to come, strong balance sheets and financials, and increasing cash flows that will be used to enhance long-term value.
So remember to review all the facts; step back, pause and reflect; consider mindset shifts; review your asset allocation and risk controls; do independent fundamental research and…
Invest accordingly!
William A. Ehrman is managing partner at Paix et Prosperite LLC.