Penn Wealth Publishing

2019.06.30 Penn Wealth Report Vol 7 Issue 03

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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 7 issue 03 30 Jun 2019 Penn Wealth Report Copyright 2019. All Rights Reserved. From the Editor/ A u-turn by the Fed, a seemingly-endless trade war, a Brexit deadline, and incessant noise from the US press regarding an election that is well over a year off. e second half of 2019 will have no shortage of potentially explosive headlines. While the first half of the year turned out about as good as most could have hoped for—despite a worrisome May—it is not difficult to fathom a double-digit move, one way or the other, for the major indexes by year-end based on any number of different issues currently simmering. Take the Fed, for instance. After a string of nine rate hikes and despite Fed Chairman Powell's boneheaded remarks late last year that we were still "far from normal" (as in interest rates were still way too low), the central bank appears poised to begin lowering rates. Some believe the market has already baked in a 50-basis-point cut in July, and one or two more cuts before the year is up. at is dangerous speculation, and we doubt that chain of events will occur. If Powell and company only lower rates once in July and go back into their holding pattern, the markets may react negatively. at Fed scenario, by the way, is what we see playing out. en there are the on-again, off-again trade talks. Will they ever be settled? It feels like Groundhog Day as old headlines get regurgitated ad nauseam. If we do get a trade deal akin to the USMCA, which is all-but-certain to get ratified by Congress, it could spell smooth sailing for the remainder of the year. It could even lead to some rosier earnings outlooks by big multinationals who desperately want to see a deal get done. If the current cycle of tariffs by the US and IP theft by the Chinese continues, how- ever, there will be a point at which the markets throw up their hands in frustration, and it will manifest as a double-digit drop in the indexes. What does the second half of the year hold in store for Europe? Germany, which is searching in vain for a new leader, skirted dropping back into a recession last quarter. at econ- omy has few bright spots right now. In England, Boris Johnson will become (we predict) the next leader of that country. at should mean the UK will finally make good on its promise (and vote) to ditch the EU. e event may cause some scary head- lines, but the markets (and the UK) will be just fine. One of the brightest spots over the course of the next two quarters might well be the emerging markets. Countries such as Vietnam and ailand have already benefited from the trade war (as companies move facilities out of China), and economic reforms in Central and South America should begin paying dividends. In short, we remain relatively bullish on the rest of 2019. MSH Michael S. Hazell editor-in-chief After the Best June in the Dow Since 1938, All Eyes Turn to the Fed and the Trade War for the Second Half of the Year Following a disastrous May, it appeared as though investors should have taken the "sell in May and go away..." advice. en came a rip-roaring June. But how is the second half of 2019 shaping up?

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