Spending Our Way to Prosperity

Jul 26, 2019   //   by Bruce Mason   //   Weekly Market Update  //  No Comments

Earnings announcements dominated the news this week.  Well, that’s not exactly accurate.  Other things that dominated the news included the bipartisan agreement to increase the U.S. debt ceiling, and the Mueller testimony on Capitol Hill, but for the most part it was earnings announcements that moved the markets.  For the next few weeks, I expect that’s the majority of what we’ll be talking about.

I know I said earnings announcements are what is moving the markets, but the budget deal is the real story this week.  The White House and congressional Democrats reached a bipartisan deal to suspend the U.S. debt ceiling until the middle of 2021, and include parity in spending increases for defense and domestic programs.  The deal is likely to irritate nearly everyone on Capitol Hill.  Republicans generally resist debt limit increases and higher domestic spending without cuts, and Democrats will have to vote for raising defense spending to historic highs.  Some breathed a sigh of relief that a government shutdown was averted while others exclaimed this is the worst budget deal ever.  Either way, the elephant has left the room and the economy is free to grow with the help of further easy monetary policy.

In other news, you likely saw Robert Mueller testify this week regarding the findings of his two-year investigation into collusion and obstruction.  Like the debt ceiling news above, his testimony either pleased you greatly or sent you into apoplexy.  True to his word, he did not elaborate on any of his findings, but instead referred one congressman after another to the text of his report.  While I can’t say I’m happy about the spectacle these committees made of the hearings, I can say I’m pleased that it appears to be over.  Neither side “won” but both sides came out looking worse for wear.  But also like the debt ceiling news, with this chapter seemingly over, the country can move onto more pressing matters… the 2020 presidential election.  With impeachment all but off the table, it would appear that the economy has one less obstacle to clear.

And lastly, while we’re on the subject, Boris Johnson replaced Theresa May as the new Prime Minister of the United Kingdom this week.  You’ll remember that Theresa May had negotiated a Brexit deal with the European Union but failed to gain enough support in her own party to get it passed back home.  Boris Johnson won the election by a 2-1 margin and has the mandate of the conservative party.  You know the elephant that left the debt ceiling room?  Well, it’s now entered the Brexit room.  Mr. Johnson has vowed to lead Britain out of the EU with or without a deal by October 31, 2019.  I’d take him at his word.  The consequences of leaving the EU without a deal are not completely clear, other than to say issues of trade and travel will be front and center on November 1st.  There’s also the issue of the $41 billion “break-up fee” that the U.K. would owe the EU.  Mr. Johnson recently said, “Let’s take the money and put it in a state of creative ambiguity suspended over the negotiations until we get what we want.”  The next few months will be interesting to say the least.

Next week, we’ll talk a bit more about corporate earnings.  I promise.  However, to end this week I came across an interesting factoid that I just have to share.  We’re all familiar with Tic Tacs, right?  You know the small, hard candy-like mints that come in the cute transparent box.  Anyway, they are marketed as a sugar-free candy, but I discovered this week that they are not actually sugar free.  They do in fact contain sugar.  However, since the amount of sugar per serving (1 mint) is less than 0.5 grams, FDA labeling requirements permits the Nutrition Facts to state that there are 0 grams of sugar per serving.  The catch is “per serving.”  Who stops at just one little mint?  Now you know.

July 26, 2019

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