William Allan - 2017 First Half NewsletterSubmitted by William Allan Financial Services, LLC on July 31st, 2017
This year’s stock market has continued where it left off last year and the year before that and the five years before that… straight up (with a minor correction here and there). This year’s version has registered an 8% return (as measured by the S&P 500 Index) as of June 30th. That’s right, for seven plus years the stock market has finished with a positive return. Quite shocking, as most people do not believe we are in a prosperous time. Why is this?
Let’s review the news/opinions heard during the first half of this year from your nightly news or 24-hour business channel… or, should I say it… social media sites! There is not a week that goes by when you have not heard about the following:
All four of these main story lines continue to persist and quite frankly, are mostly thought to be of the negative variety. This leaves the media to discuss at length that this is the most hated bull market (remember, going on eight years now) and then ask the question(s): when is it going to end and why has it not ended already?
Our answer (and as it has been for the past two decades) to these trivial questions (at least to long-term investors) is predicated on this simple premise: Business runs this Country, not the Government. We learned this in college and have seen it come true for many years as investors.
The current bull market exists in spite of the follies of Washington D.C. Don’t get us wrong; our elected officials need to get their act together like eight years ago. But, the economy is strong (for many reasons) and this prevails in the earnings of companies, which in turn drives stock prices.
It is our contention that the political nonsense has only slowed the economic growth of this great Country. The proof: President Obama was the only president to preside over an economy that never grew greater than 3% in a single year. That is eight years of Congress rather than implementing pro-growth initiatives, they were doing the opposite. Let me remind you, we are in the middle of a technological revolution that is improving every aspect of life! This slow growth is preposterous!
Back to the current state of affairs… Let’s just look at tax policy. Imagine if the world’s 2nd highest corporate tax rate (that would be ours) was even just cut in half. It would trigger billions if not trillions of dollars returning home from other countries as well as spur even greater investment in this country thus creating more jobs, more earnings, etc. The economy and thus the stock market would be even higher!
As we move into the 2nd half of the year, we can’t predict where stock prices will go in the short run, but we do know companies are strong and would suspect any kind of success in implementing President Trump’s agenda would bode well for these companies and the stock market.