April 9, 2019

As first-quarter earnings season is about to get into full swing, there is great consternation about how a stock market can rally to within 2% of its all-time high and not respect the “lower growth” forecasts for forward GDP, sales, and profits for S&P 500 companies. Every time the market finds itself back-peddling over concerns of the IMF, the WTO, the World Bank, and the ECB lowering their growth forecasts, those fears are quickly dispelled by a confident U.S. Federal Reserve that life here at home is pretty upbeat.

The Fed sounds like they are living on their own little island. Perhaps they haven’t read the most recent headlines that have focused on the slowing global economy. These headlines read like the sky is about to fall. In just the past month, some of the top stories about the global economy had headlines like these:

Global economy enters ‘synchronized’ slowdown

– Financial Times, April 6, 2019

World economy lurches from uneven recovery to synchronized slowdown

– Brookings Institution, April 5, 2019

Markets drop sharply as fears of global slowdown intensify

The Guardian, March 22, 2019

Global economic slowdown looms, exposing outgunned central banks

Washington Post, March 7, 2019

It seems like the financial media just can’t get enough bad news to print. Every day when I pull up the latest headlines on my iPhone for Bloomberg and CNBC, there is an enormous focus on what’s wrong with the world and very little attention given to what is going right. The media ignore any news about the level of prosperity under the Trump administration. They just can’t seem to do their reporting job honestly – reporting responsibly about financial markets, while putting their bias-spin into op-ed rants.

For example, the Brookings Institution used to be regarded as a “fair minded” ivory tower think tank in Washington, one that embraced “open minded” values. But Forbes recently conducted some in-depth research that would prove otherwise, revealing that BI is fully engaged in “pay-to-play” political-agenda-driven research. In “Brookings Institution – The Progressive Jukebox Funded by U.S. Taxpayers” (Forbes. June 2, 2018), the “open minded” think tank resembles something more like “open wallet.”

This is disturbing, as Brookings once carried the mantel of being an honest broker of critical fact finding, which both political parties could depend on. But Forbes says that this old culture is gone. “In many cases, Brookings doesn’t resemble a think tank, but a jukebox – add a little coin and Brookings will play your tune, if the price is right.” Forbes “found several examples of public-sponsored funding suggesting that Brookings is less of a think tank and more of a public affairs shop for establishment-left donors and allied government officials.”  So, should investors be shocked when Brookings releases a grim chart (below) of their proprietary Corporate Index of Relative Strength of a Range of Indicators? I think not.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary

Less Whine and More Cheese Needed from France

Misery loves company. That was spelled out in last week’s CNBC interview with IMF managing director Christine Legarde, who said the IMF would cut its growth forecasts this week. Sounds like she missed the latest round of upbeat manufacturing data out of China before she made her remarks and failed to notice that global equities were at their highest levels in six months after a second batch of data showed the China services sector rose to a 14-month high in March – all while tariffs continue to be fully in place.

Christine Legarde should also heed some positive forward-looking data in her own native country of France, where for 2019 -2020 the labor market and consumption growth are forecast to strengthen!

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary

The U.S. stock market is trading near all-time highs because there is a growing consensus that the first quarter of 2019 will mark an earnings bottom for the S&P 500. I find the recent movement of the Morgan Stanley Capital International (MSCI) index of global equity markets to be eyebrow-raising. Shares of the EAFE iShares MSCI ETF (EFA) traded above their 200-day moving average three weeks ago. Then they retested that technical support level and moved to a new 6-month high this past week (see chart, below).

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary

A 20-year chart of EFA shares tells quite a different story than the one being perpetuated by the bears. If the global slowdown camp that is pumping out headlines fueled by left-wing research – which is owned and operated by liberal-thinking networks – can’t get the markets to roll over by now, they’ve lost not only their bite, but their street credibility. The media will lie – they do all the time – but markets don’t lie and it is becoming more clear by the day that a free-market capitalist America is leading the global economy out of a soft-patch and back to better health.

Vive L’America!

About The Author

Bryan Perry

Bryan Perry

Bryan Perry is a Senior Director with Navellier Private Client Group, advising and facilitating high net worth investors in the pursuit of their financial goals.

Bryan’s financial services career spanning the past three decades includes over 20 years of wealth management experience with Wall Street firms that include Bear Stearns, Lehman Brothers and Paine Webber, working with both retail and institutional clients. Bryan earned a B.A. in Political Science from Virginia Polytechnic Institute & State University and currently holds a Series 65 license. *All content of “Income Mail” represents the opinion of Bryan Perry*


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