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4/17/2017

Well, it’s time to jump back into the marketplace and address all that is transpiring.  As we mentioned in our last report following the presidential election, our concerns for equities were of the increased potential of geopolitical risk and not of monetary tightening in the US.  Although stocks posted a solid few percent run in the first quarter, there’s no doubt that geopolitical headwinds have increased substantially over the past weeks, which has turned stocks into a higher risk sector and we remain neutral.  Geopolitics should remain an issue throughout the year of 2017.

The overall US economy seems to be doing ok, however heavy slack in the labor market from the past anemic economic period and an upcoming “cooling period” in the Information Technology sector (cloud and digitization but not cybersecurity) will probably keep job growth moderate in coming months.  We favor another small hike over the next quarter and mirror the vague tightening stance as communicated by the Fed.  In other words, any hikes will be followed by a wait and see period.

Recent initiatives by the new US administration remain somewhat positive for US job growth, but there are too many moving parts to say the economy will strengthen substantially.  In case you’re in the camp that the economy is very robust, just remember the shape of the yield curve which remains in a zero state.  That continues to underpin substantial imbalances as far as investment allocations go. 

Lastly, geopolitics and a moderate Fed should keep Gold OK, where a solid break above 1325 may just get this sector cranking again.  For now all eyes on geopolitics….

 

Stephan Kudyba (MBA, PhD)                      THE MARKET DOCTOR

 

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