The Most Dangerous Man In The World

He is the most dangerous man in the world. It’s not necessarily that he means to be. In fact, I think he actually means quite well. Instead, the fact that he is so dangerous simply comes with the position. So much absolute power. So little oversight and accountability. So many cheer him when times are good. So many turn their desperate eyes to him when times get tough. Mild mannered and careful with his words, but decisive and dangerous with his actions. Who is this most dangerous man in the world? Why none other than the chairman of the Federal Reserve.

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Summer Song

The summer is getting off to a disharmonious start in 2019. Following a relentless +26% rally from Christmas Eve through the end of April, the S&P 500 Index turned cold in May, falling by more than -6%. But with the “sell in May” now behind us, is it time to “go away” now that the summer is underway?

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Hey ’19

That didn’t take long. Remember all of that tough talk from the new sheriff at the Fed? Three interest rate hikes in 2019? Balance sheet reduction on auto pilot? All it took was two tough months in October and December after a decade of historically steady gains and poof, all of that tough monetary policy talk is gone. Turns out the new Fed Chair is no different than the ones before him. Hey ’19, forget about the increasingly nasty hangover of mounting financial instability and geopolitical angst looming tomorrow. Instead, pour the monetary Cuervo Gold into the punch bowl, light up those fine liquidity flows, and make trading stocks today a wonderful thing.

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Sugar High And Dry

The Tax Cuts and Jobs Act of 2017 gave corporate earnings a sugar high. GAAP earnings on the S&P 500 Index increased at a robust double-digit rate throughout 2018. Much of these gains came thanks to the significantly lower tax rates for corporations that came thanks to the legislation that was signed into law at the end of 2017. But exactly how much of a sugar high did these tax cuts provide? And what are the future implications of these tax cuts now that the sugar high is soon to start wearing off?

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Great Expectations

The U.S. stock market has a bit of an expectations problem. The rebound by the S&P 500 from its Christmas Eve lows has been impressive. So far, the benchmark index has rallied by +14% and has posted gains in 16 out of the last 21 trading days along the way. In some respects, this latest stock market rally has that same post crisis giddy up so many investors have come to know so and love so well. But this time around, the U.S. stock market is dealing with some particularly high expectation hurdles in the year ahead that may prove too much for our graying and infirmed bull market to overcome.

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