There have certainly been quite a few concerning topics in the news recently. From tariffs to tax reform, and conflict in the Middle East, there have been many things to worry about and many devastating events in peoples’ lives. Unfortunately, the media has been blasting the worst of it in our faces which makes it hard not to worry about worst case scenarios. Thankfully, so far we have avoided those and we will hopefully continue to do so.
From a market perspective, things are actually looking pretty good right now. Please keep in mind that the stock market doesn’t care about humanitarian issues. It’s an auction where people buy and sell, which values companies. So as we keep reminding people, if something you see in the news concerns you, just ask yourself, “Does this affect the profits of Apple?” You can use whatever stock you want. For example, Israel and Iran have been fighting and there has been significant loss of life and property and yet the market doesn’t seem to care. Because of this conflict, will Apple sell fewer phones or have fewer downloads? The market doesn’t think so and therefore Apple doesn’t go down.
After today’s news, hopefully the worst of that conflict is over, and the market currently agrees as we had a green day on the very disturbing news that Iran fired missiles at our military bases. Apparently, they warned us in advance that they were going to do so, which signals that it was purely a statement and not a true attack. Ideally we move on to negotiations and peace from here.
We believe the worst of the impacts from tariffs to the market are in the past and that the tax reform won’t significantly impact corporate profits. Other than the hopefully deescalating conflict in the Middle East, there isn’t much that we are currently worried about as far as the market is concerned. This brings us back to what we do believe is important to the markets, which are the Fed’s actions regarding interest rates. They met last week and didn’t change the rate, as was expected. However, we do continue to edge closer to the point where the economy will have slowed enough that a rate cut will be warranted. Right now, the overall market is guessing that that will be in either July or September. If that happens, we expect the market to react positively.
Our portfolios are currently balanced as we want them to be and we are optimistic that the market will continue to climb. If we get to the point where stocks look overpriced, we will rebalance. If the market falls and we see what look like bargains, we will try to scoop those up as we did during the tariff downturn.
