27 Feb

Focus and Embrace the Confusion

FOCUS AND EMBRACE THE CONFUSION

We would encourage readers not to stare at the “shiny” object. We would entreat people not to listen to the bombast from Washington or Mar-a-Lago. We would rather that investors focus on “what is happening” in the US economy away from the din of political skirmish.

It was reported in February that:

  • 227,000 people were added to the employment rolls in January
  • December factory orders increased 1.3% vs an expected 0.9%
  • Retail sales were up 0.4% vs +0.2% expected
  • The Small Business Sentiment Indicator rose (and did not decline) to 105.9 vs an expected result of 104.5
  • The Reuters/University of Michigan Consumer Sentiment Index for February increased to 96.3 from 95.7 and vs 96 expected
  • According to Thompson Reuters, fourth quarter earnings look to be up 7.5% year over year along with a 5% growth in revenue; further, the optimism amongst corporate managers helped boost full year earnings estimates for 2017.

In concert with political chatter about significantly reducing tax rates (both corporate and individual) and doing away with “mounds” of stifling bureaucratic regulation, the aforementioned economic/corporate results have fueled a rally in equity markets. As an example of the “good things” that are happening in the American economy, away from the political “noise”, following is a chart which monitors the health of one of the most important US industries – home building. As can be seen, builder sentiment is high and the trend for starts is rising. Combined with an ongoing rise in building permits (not pictured here) it is reasonable to expect residential construction growth for the foreseeable future.

Emotions from the recent Presidential election are still “running high”. Further, there is a lot of distraction with declarations of “fake news” and rampant voter fraud combined with gargantuan hubris. But to focus on this, to focus on the “illusionist” we think is a mistake. This enables misdirection. People who focus on the bombast miss the facts of economic and corporate advance. People who focus on the bombast worry and are underinvested. But investors who focus on the progress are invested and have benefited. So our advice is for people to …FOCUS AND EMBRACE THE CONFUSION…..

 


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The opinions expressed in this Commentary are those of Baldwin Investment Management, LLC.  These views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed. The reported numbers enclosed are derived from sources believed to be reliable.  However, we cannot guarantee their accuracy.  Past performance does not guarantee future results. We recommend that you compare our statement with the statement that you receive from your custodian. A list of our Proxy voting procedures is available upon request.

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