Penn Wealth Publishing

2018.12.16 Penn Wealth Report Vol 6 Issue 06

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Penn Wealth Publishing Subscription Information Penn Wealth Publishing 9393 West 110th Street 51 Corporate Woods Suite 500 Overland Park, KS 66210 4 Penn Wealth Report volume 6 issue 06 16 Dec 2018 Penn Wealth Report Copyright 2018. All Rights Reserved. From the Editor/ One of my favorite movies of all time is Blazing Saddles, Mel Brooks' 1974 (politically incorrect) comedy classic about rac- ism, corruption, and ignorance in the Wild West. Near the end of the movie, a fight scene spills over into a nearby set where a musical is being filmed, and then into the studio commis- sary. (Funny side-note: One of the actors eating lunch says to his buddy, who is dressed as Adolph Hitler, "How much longer you got, Lou?" Lou: "ey lose me after the bunker scene." So wrong.) Anyway, let's analogize this hilarious fight scene with the markets in 2019. Consider the street where the fight started to be DC after the 116th US Congress is seated. ink of the commissary as the stock market—minding its own business until the fighting spilled over and busted up the joint. It will get ugly, and the willing accomplices in the press will make sure it stays ugly, "dutifully" reporting on the chaos. But markets don't like chaos, they like relative calm and rel- ative certainty. Certainty about taxes, regulations, and trade policy. ere is every indication that the domestic economy will look just fine next year, as earnings reports come in strong, the unem- ployment rate remains ultra-low, GDP grows at 3+%, and the Fed stops raising rates at a manageable level. It is the ugly politi- cal environment that concerns us. On the global scene, developed-Europe will continue to be mired down by the battle between the erudite, tea and croissant crowd that runs the union, and the wide swath of citizens they disdain—those who dare question the continent's immigration policy (or lack thereof ). Additionally, we have Iran and North Korea. Li'l Kim is making nice now, but how long before his unstable personality comes shining through? Same with Putin. e Russian leader, Asperger's syndrome or not (Pentagon claim, 2008), is intent on causing trouble for the West in general— and the US in particular—everywhere he goes. Just watch the next time the US has a falling out with another country: within weeks Putin will be meeting with that country's head of state. And then there is China, as we discuss in our Outlook piece. e country's growth rate is definitely slowing down, which is funny on one hand and harmful to the global economy on the other. We are hopeful that other emerging markets in Europe, Asia, and the Far East can pick up the slack. In fact, from an economic, geopolitical, and military standpoint, that should be the unstated strategic goal of the United States with respect to the foreign stage. In short, 2019 will be a repeat of 2018 from a volatility standpoint. Investments should be tactically-selected and moni- tored as events unfold. UBS came out with an interesting report last week, predicting that the S&P 500 will close out this year at 2,875 and 2019 at 3,200. at would mean a 10% rally before 31 December, and a 23% jump between now and the end of next year. We sincerely hope they are right. But hope is not a strategy, so we must prepare for everything we discussed unfold- ing as predicted. Search for growth, but be hyper-vigilant. MSH Michael S. Hazell editor-in-chief 2019: A slowdown abroad and incendiary grenades lobbed at home Professional market-watchers are underestimating just how ugly politics will get in Washington next year. Unfortunately, the brawl will bleed over into the markets and the damage could be costly.

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