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Yes…we are back.

Yes the Doc is back after a prolonged furlough which avoided unnecessary updates during the “steady as she goes” stimulative efforts of saving the economy by forcing investment allocations to US equities and higher risk assets to achieve positive returns.  The Doc’s team has been dormant for some time given the lack of change in policy of zero interest rate policy promoting the “hold your nose and buy” tactic of buying stocks.

So why the update now? Well, it seems that there are a handful of factors that may finally throw a monkey wrench in the “buy stocks and shut your screen off” investment scenario.  These factors include an improvement in job creation in the US, a pickup in US inflation and a plethora of global unrest that could ultimately impact the state of global commerce.

The US unemployment rate has been falling and the two-week average for initial claims has supported this scenario (which shows a pickup in economic activity).  CPI in the form of higher food prices and yes, even real estate has followed suit.  The Doc’s team attributes this to the exuberant state of stock gains which have transpired over the past two years, as opposed to sound economic fundamentals.  In addition to the above comments, global unrest in the Middle East and Europe has reached alarming proportions, which has already affected economic activity on a number of fronts.

The Doc is by no means getting bearish on Stocks just yet, (although valuations are simply ridiculous), but we will continue to monitor the state of affairs and voice some concerns as to “closing your eyes and buying stocks tactic” at this juncture.  Here’s a thought to leave our loyal followers….if economic indicators are so strong, why is it that interest rates remain at zero and negative interest rates remain?

Talk to me at a fed funds rate at 2.5%


Stephan Kudyba (MBA, PhD)                      THE MARKET DOCTOR


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