I’ve said this before in my other publications, but I can’t recall such a strange time in investment markets.
And I’ve been following the market for decades.
Investors and economists just can’t get on the same page. Some think this bull market has months – if not years – left. Others think a bear market is nearly here.
But what’s most confusing is the health of the economy.
Some measures show that the economy is booming. The July consumer confidence figures were just released, and consumer confidence is up 9% compared with last month. Unemployment is near a 50-year low. And gross domestic product (“GDP”) for the second quarter came in at 2.1% – beating expectations of 1.8% growth.
On the other hand, there’s all this talk of slowing global growth… And of course, there’s still a trade war going on.
Luckily, we’ll get some much-needed answers this week.
First, the Federal Reserve just announced it’s going to cut interest rates by a quarter-point. This is the first time the Fed has cut interest rates since 2008.
That brings up the question… the economy can’t be that healthy if the Fed must resort to cutting rates, right? Clearly, the Fed is worried about the economy – it thinks a cut is the best way to keep the expansion going. Or the Fed jacked up rates too much and is now cutting them because of its mistake.
Either way, a rate cut will help the economy.
Besides news from the Fed, we’re also getting more on the trade war front…
For the last two days, U.S. Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin, and their Chinese counterpart, Vice-Premier Liu He, met in Shanghai to see if they could make any progress with trade talks. Expectations for a breakthrough have been low.
But we didn’t hear anything promising.
We’ll also get more clues about the health of the economy because we’re smack dab in the middle of earnings season. You won’t get a better gauge of the economy’s health than paying attention to how well businesses are doing.
Based on the results we’ve gotten so far, not much has cleared up.
First, let’s look at results from railroad company CSX (CSX). Investors sold the stock in a hurry after it reported its rail traffic declined more than expected. Here’s what CEO Jim Foote said about the economy: “Global and U.S. economic conditions have been unusual to say the least… The present economic backdrop is one of the most puzzling I’ve experienced in my career.”
The news from CSX suggests a slowing economy. Shipping is central to economic activity… and according to CSX (and other rail companies), goods aren’t moving around as much.
But then, a week later, United Parcel Service (UPS) announced blockbuster results: Daily shipping volume grew 7%. UPS Next Day Air saw volume surge 30%. The environment is so strong that UPS is raising prices and has plans to buy 44 planes and add 2 million square feet of logistics space.
CEO David Abney said, “The U.S. economy appears to be in better shape with lower unemployment, healthy consumer demand, and forecasts for improved U.S. GDP.”
Two different businesses and two different outlooks for the economy.
Now consider Caterpillar (CAT) – the maker of industrial-grade, heavy equipment. It flubbed its earnings… missing expectations by 9%. Meanwhile, United Rentals (URI), which rents out heavy equipment (exactly like the things Caterpillar makes), posted earnings 6% higher than expectations.
The point is that this is a confusing time to be an investor. We all can agree this bull market will eventually die… but no one knows how. And no one knows when.
I’m skeptical of how much longer the boom times will last, but I’m not ready to throw in the towel just yet. My advice remains the same…
Hold plenty of cash. Own quality businesses. Own some gold as a chaos hedge. Be conservative with your money, but stay in the game.
Now, let’s talk about speculations… And by speculations, I mean buying stocks or assets that are unproven. They have a lot of risk, but they also offer massive potential returns. Many readers have been wondering my stance on taking risk.
Even in this confusing market, I think it’s okay to speculate… As long as you are allocating correctly. Speculations should only be used with what I like to call “play money.”
If you want to put some play money to work and bet on the Melt Up, go right ahead. If you want to make a small bet on pot stocks, go right ahead. Or on bitcoin… Well, maybe not bitcoin.
Even a small bet on a speculation can pay off in a big way. One 500% or 1,000% winner will make up for a lot of losses your portfolio may suffer if the market does turn.
That’s why tonight, Stansberry Research is teaming up with Matt McCall. If you don’t know Matt, you should…
Matt is a guy who tapped into what’s truly happening on the ground… He’s constantly traveling to learn about worthwhile industries and companies.
And tonight, for one night only, he’s pulling back the curtain on how he finds stocks before they shoot up over 1,000%.
What We’re Reading…
- Something different: Boom in refinancing boosts mortgage lending.
Here’s to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
July 31, 2019