• Will there be a major tax-code revision, and what will it look like?
• Will there be corporate tax reform and/or income tax cuts?
• Will there be a trade war with Mexico or China or whoever?
• Is there going to be an overseas profit-tax repatriation?
• Will a major infrastructure project accompany that?
• Will we have a major deregulation push, and what are the positive (short-term) and negative (long-term) consequences of that?
• What is the state of the European crisis and Brexit? And what wild-card events can we expect from the White House?
Thus, what you see from the managers assumes that they have insight into these questions as well as a high degree of confidence that their understanding is probable or even likely. Note that we haven’t even gotten to Japan or the Middle East or any unanticipated externality, let alone a presidential tweet-induced crisis.
To answer the first question posed above -- which are pricier, stocks or bonds? -- requires you to answer the latter questions. If you cannot do that, then you are making a guess, which if wrong is likely to be quite an expensive mistake.
This column was provided by Bloomberg News.