The Dividend Cafe - Larry Kudlow, March Madness, and More!

Episode Date: March 15, 2018

This week, David L. Bahnsen discusses President Trump's appointment of Larry Kudlow as NEC Chairman, as well as recapping market trends and some talk on March Madness! Links mentioned in this episode: www.DividendCafe.com www.MarketEpicurean.com www.AdviceandInsights.com

Welcome to the Dividend Cafe actually recording a little early. We want to get everything out to you today, Thursday, as opposed to our normal delivery of Friday. So whether you're listening to the podcast right now or watching the video or even when you're reading DividendCafe.com, it was a little earlier than normal and you'll read why that is if you read DividendCafe.com in our concluding paragraph. But let me kind of get into a few things this week before we call it a day, whether you're listening or viewing. The big news for me this week is the announcement of Larry Kudlow to be the director of the National Economic Council. It's the highest ranking position as an advisor to the president on matters of economic policy. As you know, Gary Cohn, the former president of Goldman Sachs, had served the

position, I would argue served it ably, competently for over a year and resigned last week and added a little bit to volatility in the markets. And the president this week announced someone who, full disclosure, is a very, very close friend of mine. I speak to him very often and he has mentored me and taught me and so forth in so many ways. I'm eternally grateful. So even apart from my personal affections for Larry, this individual, in my mind, for what it represents for markets, to have someone who is so competent and versed in the merits of private enterprise and in the engines of economic growth that matter to policy formulation and his ability to articulate these things. He's been in the media for nearly 20 years as far as his anchoring

position and having a show and being a correspondent at CNBC. But really, if you go back to his days as the chief economic strategist at Bear Stearns, he was regularly a front person responsible to communicate a viewpoint. And that's what he did. And he did it as well as anyone I've ever seen. But I think it will be a tremendous benefit to the economic agenda of this administration to drive a pro markets viewpoint. And Larry is in a different position than the president on these trade and tariff issues that have been and from our writing and our viewpoint and our portfolio positioning, we think very problematic the last couple of weeks.

And Larry is extremely aligned and, in fact, was an advisor to the campaign around tax policy, corporate tax cuts, things of that nature. So we really do believe that this is a big deal to markets. do believe that this is a big deal to markets. And besides the fact that I'm personally very excited for him, what it represents for our country and for him personally. But as far as the other aspects as we go as driving markets, there is definitely still some uncertainty underneath the surface regarding where we go next on this sort of protectionist posturing from the president. Again, another alliteration. Some of the industrial companies were hit this week. There's more talk as to what he wants to be doing with China. And we know, obviously, the steel aluminum story that continues to be tethered away at. So by the appointment of Larry Kudlow to replace Gary Cohn

versus one of the more protectionist voices and anti-trade pro-tariff people in President Trump's potential orbit, I am excited about that from a market standpoint. But the president's going to do what he's going to do. And so we have to continue watching whether or not we are perhaps going down a slow protectionist path. For now, our viewpoint is that optics have become much more important than actual policy. And frankly, we're happy about that, at least in terms of our viewpoint as market participants. OK, in terms of the other things, we're waiting for the first quarter to finish we

want to see what earnings growth ends up looking like so the middle of april can't come soon enough for us earnings watchers but really from a macro standpoint the jobs report last week the market went up 400 points on friday you had over 300 000000 jobs created in the month of February, which is our first kind of real month without holiday related factors and in light of the tax cuts. But then wage growth was only 2.6% year over year and the month before it had been 2.9%. And so all these inflationistas worried that wage growth means inflation and then therefore accelerated fed tightening they sort of almost felt like wage growth was good but not so good that we have to be worried and as you know i don't buy into that argument to begin with but the point was the market got that kind of sweet spot they wanted of really robust jobs

numbers and not inflationary fears around the wage number. So you have those forces on a macroeconomic standpoint still looking good, and you have an earnings environment that we expect will continue to look very solid. We really don't believe there's going to be any surprises to the downside out of corporate tax reform. We don't know how much the surprises to the upside will be, but we're expecting some around all aspects from repatriation to capital expenditures to the immediate expensing and these things that play into corporate strategy and ultimately to bottom line numbers, free cash flow generation, etc., etc. We continue to believe from the February sell-off there's some names that look attractive. We interestingly do not feel that a lot of other international things got particularly attractive.

You even look at some of the recovery out of the February sell-off, and the European stocks are continuing to really struggle with certain headwinds, concerns about what may or may not come of their debt problem when the monetary assistance goes away. But I think there probably are some great bottom-up stories, individual companies in Europe. But from a macro standpoint, we're not looking to make a tactical weight there. So I would encourage you to go to our Advice and Insights podcast this week. We interview our emerging markets partner. We have an extensive conversation around our outlook on the emerging market space. I see nothing at all right now diluting my

enthusiasm for our position in the Japanese markets, picking these growing dividend payers that we think are being bought at the right time at the right price. And overall, we want to be on the moderate and prudent side of our equity exposure in the U.S., still believing that earnings driving profits, driving prices higher, and the macro environment is very healthy, but just completely expecting totally different volatility profile than we've had. All these are coming true everything that we've really expected for this year has been the case so I'm gonna leave it there we encourage you to reach out if you have any questions I I really do feel strongly that this nine-year anniversary of the bull market beginning March nine years ago is a big deal. It's a big deal because the bull market's still going, but there's been extended

periods of flat markets. Look at the chart of the week, by the way, at DividendCafe.com. So you have a very interesting lesson in the last nine years. Those that did not give in to the capitulation and fear at what was an unbelievably tempting point to give into it, reaping incredible benefits over the last nine years. And yet along the way, there's been repeated bouts of panic and incidents of volatility. There has not been a sustained bear market. Two different 50% drops in the 10 years prior shook the faith of a whole generation of investors, and I think it's a tragedy. But for those of you listening and watching right now that were not victimized by that fear

and, in fact, took advantage of the market environment to the betterment of your portfolio, I say congratulations. A lot of behavioral lessons in this nine-year anniversary. Anyways, I've got to leave it there. Congratulations to Mr. Kudlow and all of you. Have a wonderful March Madness weekend. Get your brackets ready. Enjoy some college basketball. weekend. Get your brackets ready. Enjoy some college basketball.

Welcome to the Dividend Cafe, financial food for thought. Thank you. All data and information referenced herein are from sources believed to be reliable. Any opinion, news, research, analyses, prices, or other information contained in this research is provided as general market commentary. It does not constitute investment advice. The team at Hightower should not be in any way liable for claims and make no express or implied representations or warranties as to the accuracy or completeness of the data and other information or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice. Thank you.