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Market Comment - April 2018 - DUMB and DUMBER

Remember the old Jim Carrey movie, “Dumb and Dumber”? That’s what the current administration’s ideas and policies on the economy remind me of:

DUMB: The tax “reform” bill. Let’s face it; this is not a “reform” bill. It is, simply, borrowing from the Treasury (going into debt) to the tune of 1.5 TRILLION DOLLARS to attempt to stimulate an economy that does not require stimulation. Put another way, it is a huge tax gift to the wealthiest of us as well as large corporations, who simply DON’T NEED such largesse. The rest of the country’s citizens get crumbs. It reeks of donor payback, and comes at the worst time: the top of the economic/business cycle. My sense is that it will goose corporate profits (and perhaps the stock market, if it hasn’t already discounted this) in the short-term, but jack up the deficit (and possibly interest rates) in the long-term. DUMB.

DUMBER: Putting tariffs on imports of steel and aluminum from other countries –namely, China. Do we really think that this will “force” other countries to come to the table and negotiate trade policies that will benefit the U.S.? Not a chance. We have already seen China come back with a list of 100+ imported U.S. products and commodities that they, in turn, plan to add significant tariffs to. And on the subject of tariffs: remember what your history books told you was one of the main causes of the Crash of 1929 and Great Depression? You guessed it --- tariffs. TARIFFS = TRADE WAR = DUMBER.

We can only hope that for the long-term health of our economy – and the stock market – that these seat-of the pants, short-sighted, DUMB policies get reversed sooner than later.

Unfortunately, it may not happen until after 2020.

-Bill McKinley

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