Are these unprecedented times or not? Or is history rhyming again. Is the Fed going to cut rates, what is going to happen with the election, are we facing a continued bubble, etc.

Additionally, banks continue to tighten lending and as of Q1 2024 marked eight straight quarters of tightening lending. Why does this matter? Supply and Demand. The price of money or credit is the interest rate. The amount of money in the system caused by the US debt combined with the banks tightening, it creates a near perfect problem. One the other hand consumer confidence is accelerating and we are a consumer driven economy...

The theme Higher for Longer continues in Debt, Deficit, and inflation continues. Loss in buying power. Headwinds abounds. What we are seeing could be a "Seven Day Forecast" that sums up what the Fed is feeding us on inflation and some other data that are providing. They keep holding the possibility of a rate cut that will be the savior of the market and allow the economy catch up to the stock market.

Do we have a Potemkin Village on our hands? The 2yr vs 10yr yield curve is still inverted, inflation is still high, and government is still spending like a drunken sailor. Like with all bubbles we have to admit there is one.

With that said, one should never bet against the US economy. Having the right risk allocation within your portfolio is key for ongoing success.

The US is a consumer driven economy thus when the general household has more money to spend it will boost the economy overall. However as we discussed in previous newsletters there is still are student loan payment issues, increasing credit card debt, and inflation continues to rise. There are lots of headwinds, by cultivating an improvement in consumer sentiment is less bad and thus help move the sentiment from an investment manager standpoint to be willing to move into more risk (put more cash into the market). Is everything Rosy?

Market go in cycles. Cycles can move fast or slows. We've had 26 months of deceleration of earnings. The Russell 2000 year over year net income has been atrocious. While the S&P 500 has stayed positive, it is negative if we strip out the top seven largest companies.

Higher for Longer is here, ups and downs are here for a while, time to be well positioned within the portfolio.

Normality. Abnormal. The only thing that is constant is change itself. This year had a lot ups and downs, things that were odd, but were they truly out of the normal? No.

However, like with most years, there were good parts of the market and not so healthy parts. There were things that no one could have predicted, e.g. as much government spending as happened. But, like golf, you have to play golf where the ball is.

And then government spending happened. Government spending through out the year propped up the market and general economy for first 10 month of the years. November had huge rally's in both equity and bonds. The data is starting to turn positive. However, at what costs...$33 Trillion in debt?

Are we out of the clear?

As we see final economic data coming in from the first and second quarter of 2023, signals and indicators show that we were more conservative than we should have been in the first 8 months of the year.

Then September and October happened. Is the storm over or just beginning?

Mark Twain coined the phase, "lies, damned lies, and statistics." The statistics (data) is pointing to a pull back as we going forward. Will it be a sharp pull down and sharp rebound. is the data lying to us? From consumer squeeze, worse job report than expected, etc. Where is escape hatch?

When you only have a hammer everything looks like a nail. The Federal Reserve has very limited tools to control the stock market. It can influence the economy and thus can indirectly influence the market, but often time they are slow or late to the party.

Are we are the bring of a pull back on the stocks and bonds or are the singles mixed. Where we do go from here?