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A Singular Viewpoint

A Singular Viewpoint

John Hsu
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Global Overview , July 14, 2017

We have been of the opinion that Chair Janet Yellen’s action late last year in terminating quantitative easing and signaling the return to a more traditional Fed policy in normalizing interest rates marked a constructive change for Fed policy. To us this also signaled an early indication of the major redirection for global financial markets. As much as Europe and Japan have followed the US in economic policy, Yellen’s actions do signal that an end to zero interest rates may be in sight on a global basis in the not too distant future. The US being the world’s largest economy may likely be the early indicator for global central banks.

The Fed’s abandonment of quantitative easing was of course very quickly followed by the surprise election of Donald Trump as President, with the prospect of a possible adoption of right of center economic policies in the US. Whether it is the repeal and replacement of Obamacare, tax reform or enhanced infrastructure spending, these are dramatically different economic initiatives than had Hillary Clinton gotten the nod from the American people.

We made the decision that these events could very well signal the beginning of a major global bull market of long duration and structured our portfolios accordingly.

In the subsequent months that have passed since Donald Trump has occupied the White House, the many inadequacies of our government in Washington have surfaced. Republicans who have complained for 7+ long years about the inadequacies of Obamacare and who have consistently threatened its repeal now seem to be entirely held captive by literally a handful of their leadership who are totally preoccupied in sounding off in front of the press. In the meantime, Democrats are still in shock at their loss and have adopted a policy of obstruction as the most effective way for them to make a contribution. Both parties seem entirely preoccupied with petty partisan politics rather than the well-being of the nation or the American people.

It is encouraging that despite the swamp called Washington politics, financial markets have been able to consolidate the gains from the beginning of the year. Perhaps investors remain constructive that at least some of President Trump’s economic initiatives will be able to break through the logjam and be adopted as policy in the next roughly 3 ½ years. On that basis, we believe that the global bull market is still intact.
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