“A wise and frugal government … shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government.” – Thomas Jefferson (1801)

 From the U.S. Bureau of Labor Statistics:  Median weekly earnings of the nation’s 117.6 million full-time wage and salary workers were $908 in the Second Quarter of 2019 (not seasonally adjusted).  This was 3.7% higher than a year earlier.  The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3% in April and 0.1 % in both May and June on a seasonally adjusted basis.  Over the last 12 months, the All Items Index increased 1.6% before seasonal adjustment.  Our inflation rate is very low.  And that’s a good thing.  The U.S. Labor Department reported that in April the unemployment rate was 3.6% in April, 3.6% in May, and 3.7% in June, 2019.  Unemployment numbers are at roughly 50-year lows in America.  Just about everyone who wants a job can find one

The U.S. Federal Reserve has left little to the imagination about their intentions on rates at their July 31st meeting.  Fed Chair Jay Powell delivered a speech in Paris recently where he reiterated that the Fed will “act as appropriate” to keep the U.S. economic expansion going.  He also noted a few key global concerns that are adding “uncertainty” to the economic outlook in the U.S. and abroad, including the U.S. Federal Debt Ceiling; a prolonged shortfall in U.S. inflation; and Brexit.  Federal Reserve Bank of New York President John Williams said this week: “When you only have so much stimulus at your disposal, it pays to act quickly to lower rates at the first sign of economic distress.”  The only real question now seems to be will they cut 25 or 50 basis points? [One basis point = 1/100 of one percent.]  US-China trade has faded somewhat into the background.  Investors anticipate the present truce persisting for the foreseeable future, with existing tariffs staying in place but incremental ones being implemented” –  SOURCE – ARTHUR HOGAN, CHIEF MARKET STRATEGIST, NATIONAL SECURITIES CORP.  MORNING COMMENTARY FROM JULY 24, 2019

The S&P Index crossed 3,000 for a few hours on Wednesday, July 10th, for the first time ever as Fed Chair Powell was testifying before Congress.  On Thursday, July 11th, the Dow Jones Industrials crossed over 27,000 for the very first time.  Do these positive results in market performance portend another time of Greenspanian “Irrational Exuberance,” or just the continuation of an aging Bull Market?  We can’t foretell the future until it has become the past. 

At some point the pundits will dissect the most recent data and pronounce a concluding diagnosis, as they always do.  But how does that help?  What’s an investor to do now?

We can start with what we know of past Bull and Bear Markets.  Bull Markets start to grow during pessimistic times.  They mature during good economic times and begin to die during times of euphoria.  Then, at the next point of maximum pessimism, the next Bull Market is born.  This up and down cycle was recorded in a book by Charles Mackay called Extraordinary Popular Delusions and the Madness of Crowds, first printed in 1841.  It may be the best book ever written to describe crowd psychology.  Mackay describes some of the best known cases of market insanity, starting with the Dutch Tulip mania of 1634, when newly discovered tulip bulbs were temporarily worth more than gold.  A number of other get-rich-quick popular schemes during the 18th and 19th Centuries are described and analyzed.  At this time, there are no wacky popular delusions of any consequence, in my opinion.  Well, maybe Cryptocurrency, which is a form of money that has no country or bank to back it up.  Bitcoin was the first of these digital mediums of exchange. 

The increasing Federal Debt is not a delusion in the usual sense.  It’s more like a very bad case of wishful thinking.  It goes something like this: “If we don’t have to solve this debt thing right away, we can kick the can down the road and let someone else deal with it.”  Sadly, those some ones will be our children and grandchildren.  All states except Vermont have balanced budget laws.  But Congress is perpetually incapable of balancing the Federal Budget.  Maybe we should elect politicians who want to run a fiscally sound nation.  Despite the increasing national debt, shares of stocks have performed well over the past decade, mostly because of demand.  Bonds have also done well because interest rates have not gyrated up and down during the past decade. 

In my opinion, this may be a good time for some of our clients to take some profits off the table and reallocate proceeds of these sales to more conservative, income-producing securities.  Sue, Alecia and I have noticed that the so-called Responsible Investments are gaining in popularity with investors who want securities that embrace high environmental, social and governance (ESG) standards.  During 2016 more than $ 8.7 Trillion was invested in ESG securities.  We believe our clients should consider including some of these ESG investments in their portfolios.  It’s always a good time to call our office (508) 240-0320 to schedule a review of your current investments.

SOURCES: Thomas Jefferson; US Bureau of Labor Statistics; US Labor Dept.; US Federal Reserve; Arthur Hogan, Chief Market Strategist, National Securities Corp.; Charles Mackay – Extraordinary Popular Delusions and the Madness of Crowds;  US Federal Debt Clock.

The Views and opinions expressed herein are those of Robert Brimmer of Brimmer Financial and are current as of this report’s posting date.  This commentary is general in nature and should not be construed as investment advice.  Opinions are subject to change with market conditions.  The views and strategies may not be suitable for all investors and are not intended to be relied on for legal or tax advice.  Please note that any investment involves risk including loss of principal.  Interest rate risk is the possibility that the value of an investment will decline as the result of an unexpected change of interest rates.  Securities offered through National Securities Corp., member FINRA/SIPC.  Advisory services offered through National Asset Management, an SEC Registered Investment Adviser.  Fixed Insurance Products offered through National Insurance Corporation.