There You Go Again

The opinion is virtually unanimous. Growth is accelerating. Inflationary pressures are on the rise. The U.S. Federal Reserve is going to raise interest rates twice if not three times next year after what was interpreted as a more hawkish tone from the Fed on Wednesday. Bonds along with dividend paying stocks are set to take a drubbing as a result. Troubling sentiments indeed for the more conservative investor.  But history is rhyming once again.  Beware the consensus, particularly when it’s laced with hubris.  Be a contrarian.

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Trumptagion

Much has been made about the “Trumphoria” that has spread like wildfire across the U.S. stock market. But not all corners of global capital markets have been rejoicing since the outcome of the U.S. presidential election was revealed just over a month ago. In fact, a number of major economies are now facing pressures to their economies thanks to the spillover effects from how some key asset classes have responded to the election results. And if these recent trends continue into the future in the way that some experts are currently proclaiming, we may start hearing about “Trumptagion” spreading across the globe before it’s all said and done.

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Popeye Goes To Washington

Enjoy the candy while it lasts. While it has received relatively less attention in the financial media since the election in early November, the new administration is likely to bring meaningful changes for the Federal Reserve and the direction of monetary policy going forward. And given that the primary driver of stock market gains throughout the post crisis period has been the aggressively easy and accommodative monetary policy from the Fed, the likely changes have the potential to completely transform what we should expect from investing in the U.S. stock market going forward.

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Capitalizing On The Interest Rate Outlook For 2017

It was right around this time last year that expectations were building about Fed policy in 2016. On the brink of raising interest rates in December 2015 for the first time in the post financial crisis period, the consensus view was that the Fed would proceed to raise interest rates between two to four times in 2016. But here we are roughly a full year later and we are still waiting for the first rate hike in 2016. It seems all but certain (at least right now) that the Fed will finally sneak in a rate hike in December before the buzzer sounds on 2016. But what is more notable is how ambitious the consensus view has become once again surrounding how the Fed is likely to proceed in 2017. And just as I did at this time last year heading into 2016, I have a decidedly different view on the path for interest rates today going into 2017.

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The Time Value Of Opportunity

The time value of money is a finance concept that recognizes that a dollar held today is worth more than a dollar in the future. This is due to the fact that the dollar held today can begin earning interest as soon as it is received. Or viewed differently, a dollar in terms of purchasing power is worth more today than it will be in the future due to the eroding forces of inflation. Ironically, those that directly manage the money supply in the United States are currently facing a similar time value dilemma, except their challenge deals not with money but instead with opportunity. And when confronted with their latest decision in this regard on Wednesday, they came up troublingly short.

Please click on the link to read more of my article on Seeking Alpha.