From Bob's Desk

AUGUST 31, 2018 - TRADE WARS

Dear Friends,

As you know, it's never dull in our business as we do our best to weigh all the outside events that can affect our money management decisions. At the moment, it's easy to fret about Trump's trade wars, the now definitive rise in interest rates, whether Mr. Un will trade his nukes for nourishment and even the more recent Turkish currency fears. Never dull, indeed.

But one of the looming issues that is calendared for November 6th, a mere two months away, will be the mid-term elections in our country. We will not delve into the politics per say, lest I irritate both sides of the aisle, but we should examine the potential impacts. As we all know, mid-terms are generally a referendum on the party in power, and historically that party usually takes a drubbing. Ignoring all the social issues that will drive one's decision, let's just look at the possible economic result. 

I believe, if the Repub's lose sufficient seats in the House, as some pundits predict, that may give the other team a chance to dramatically slow down the policies currently being touted by the Prez. The de-regulation fervor that is underway right now could significantly slow. Any further tax reductions may likely be off the table too. Additionally, while the executive office has considerable power when it comes to our nation's trading policies, it's a fair likelihood that with democratic control of the House, Trump's bid to challenge primarily China's trade practices will likely fall by the wayside. 

Interestingly enough, that potential flip from Speaker Ryan to Speaker Pelosi may be a zero sum game. While the markets, notably stock and real estate, don't like to see more regulation and potentially higher taxes, the worry about a major trade war with our biggest partner (China), would likely be allayed. At the moment, it is that concern that is weighing most heavily on the market. 

So while the two political parties will both scream at the top of their lungs that the other is the root of all evil, the reality is the 2018 mid-term's may pass as a relative non-event for stocks and interest rates. Indeed our sense is that the exceptionally low unemployment we are enjoying right now, should lead to a long overdue wage-push for the often ignored middle class. That could bode well for our investment outlook as long as inflation stays mute. Couple that with a little less fear about a no-win trade war, and we could potentially see a reasonably strong end to 2018 and a bit of a tailwind as we enter '19. Overall, we think the politicians will do what they do, but the Goldilocks economy of neither too hot, nor too cold, should generally continue; guarded optimism as we're fond of saying.

Stay tuned for more as we are always taking the pulse of where we need to place your all-important funds in effort to be both opportunistic and as protective as possible. Call with any questions or concerns, we're always here for you.

Wishing you a wonderful Labor Day weekend! 
Bob


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The views expressed by the author are his own and do not necessarily reflect the opinion of Wells Fargo Advisors Financial Network or its affiliates.
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