Notes on the Week Ahead

2020 has quickly become the year of the virus. It should, of course, first be recognized that, for some families around the world today and, sadly probably many more in the months ahead, issues of economics, politics and finance will be but a small footnote to personal tragedy.

Springing to life nearly a mile above sea level, the Zambezi River gathers strength, speed and tributaries for more than two hundred miles before hurtling over the Chavuma Falls in Western Zambia.

Despite a strong January jobs report, real economic growth is continuing to decelerate in the first quarter of 2020 and could fall below 2% year-over-year for the first time since 2016.

Last week, I decided to avoid shaking anyone’s hand. It’s not that I have a virus. It’s just that my job, which involves lots of plane travel and hand-shaking, make me particularly susceptible to getting one. And I would really rather not be ill.

Among the card games of my misspent youth was a game called Pontoon. The rules of Pontoon are very similar to Blackjack – the object is to get as close to 21 as possible without going over.

On economic news, the December Jobs report generally suggested stable growth. The payroll job gain, at 145,000, was slightly weaker than consensus but not alarmingly so.

25 years ago, I had the privilege of working with a very smart and well-respected strategist at a Wall Street sell-side firm.

My wife, Sari, and I have a long-standing disagreement about how warm our home should be.I contend that a man shouldn’t have to wear an overcoat in his own house just to ward off frostbite.

There’s an old saying that the reason some people bash their heads against the wall is because it feels so good when they stop. Many economists would see last week’s trade news in the same light, judging that Brexit, the threatened abandonment of NAFTA and the trade war with China were all populist-driven negatives for the global economy.

For investors, the market environment seems to be in a holding pattern, with little movement in economic fundamentals and a slow melt up in equity prices. For those trying to while away the time until there is some genuine change, there are some key questions that will be addressed by events in the week ahead.

The week ahead will be a busy one for economic data, with global PMI numbers on both manufacturing and services and U.S. readings on Light-Vehicle Sales, International Trade and Consumer Sentiment. However, as is usually the case in the first week of the month, the most important numbers will be contained in Friday's Jobs report.

This week, most Americans will be hopefully be focused on family and food rather than the economy and markets. However, at some stage over the long weekend, a few may decide that they have had a sufficient helping of both pie and relatives and be looking for a distraction.

America’s finances have been deteriorating for almost two decades. In October 2000, the Treasury Department announced a budget surplus for the just-ended fiscal year of $236 billion or 2.3% of GDP. The federal debt amounted to just over $3.4 trillion or 34% of GDP.

My weight never changes. For pretty much all my adult life, I have looked down at the same small range of numbers on the bathroom scales. ... Much the same could be said of inflation in recent decades.

Last week, the U.S. economy saw a sudden and definitive transition and settled into a path of slower growth.

The next few days will see a blizzard of news impacting financial markets. For investors, the most logical approach may be to look at the headlines one at a time and then see how they can be linked together in constructing a view of the investment environment.

The Tax Act of 2017 was a bit like a pair of speedy running shoes for U.S. corporate earnings. It allowed for a short-run burst of strong year-over-year gains. However, since the start of this year, these gains have plateaued and earnings growth is likely to be very slow going forward.

Entering the fourth quarter of the year, nothing seems easy for investors either and there are a number of issues that are making it difficult for markets to move higher from here. However, it is important to recognize any softening in these impediments to progress.

The financial environment facing U.S. investors in the year ahead will involve some very close calls.

My eyesight isn’t what it used to be.It’s not quite as bad as my wife thinks it is, but if I’m watching a football game or trying to read slides from the back of a room, I now don a pair of specs.

On Wednesday, the Federal Reserve will conclude its September policy meeting. Futures' markets have priced in a high probability that they will cut the federal funds rate by 25 basis points and this is likely what they will do. However, there are at least six good reasons why they shouldn't.

In my admittedly conservative opinion, modern rackets have diminished the game of tennis as a spectacle. Booming serves from both opponents have led to fewer competitive games, with many sets turning into a rather dull march to six-all, ending in a tiebreaker. Now, there isn't any need for a tiebreaker in analyzing the long-run prospects for the U.S. economy since it really isn't a close call.

In America today, there is an obsession with how to stimulate demand, with fiscal policy, monetary policy and currency policy all being deployed to rev up the economic engine. However, America is facing a demographic pothole, and unless we fill it, growth will be mediocre, at best, regardless of how we try to stoke demand.

In days of yore, the sight of seagulls wheeling over an inland forest or fields was taken as a sure sign of a storm at sea. In a similar vein, last week, many investors took the sight of an inverted yield curve as a sign of impending recession.

I have always been a middle-distance runner. I think this serves me well today as, while many strategists and financial advisors talk about investing as a marathon, it is essentially a middle-distance discipline.

The economic recovery that began in 2009 has proven its endurance many times and is now the longest expansion in history. Our base case forecast is that it will continue into 2020 and probably beyond.

The week ahead, like last week, will be crammed with important market-moving events and data points. The challenge for investors will not be in predicting instant market reactions to this new information but rather in understanding how it could change the investment landscape going forward.

The formula in Hollywood today lacks imagination. It's all about remakes and sequels. Financial markets, too, are seeing a series of sequels and a few are opening this week.

In the financial landscape of 2019, the Federal Government and Federal Reserve are playing the parts of over-indulgent grandparents, the markets are cast as the over-stimulated grandkids and investors are left with the role of responsible adults, having to make rational choices and knowing that they will eventually have to deal with the consequences of too much stimulus.

On Wednesday and Thursday of this week, Fed Chairman, Jay Powell, will deliver his semi-annual testimony to Congress on the outlook for the economy and monetary policy. As he prepares, while he will focus on the clarity of his message, he may well be distracted by the potential reaction of political and market audiences.

My wife, Sari, is an excellent cook and sometimes, when I return from a long day, I'm met at the front door by the delicious scent of freshly-baked chocolate-chip M&M cookies. The problem is, with a pair of cookies eaten but a big pile of them still smiling up at me, can I stop at just two? The Federal Reserve faces a similar dilemma when it comes to rate cuts.

I should state, at the outset, that I do not profess to have any deep understanding of quantum mechanics. However, the U.S. bond market and the U.S. stock market seem to coexist in alternative realities today.

On Wednesday, the Federal Open Market Committee (FOMC) of the Federal Reserve will hold its fourth meeting of the year. The Fed is not ready to change interest rates yet.

Following Friday's May jobs report, and in reaction to slower growth, lower inflation and trouble in the global economy, the Fed is clearly taking a more dovish stance, making at least two rate cuts likely by the end of 2019.

Commercial interests dictate that the public must always be shocked or scared out of their complacency and so the "worst case scenario" will always get top billing.

Despite a better than expected outcome from earnings season, the economy once again appears set for a slowdown with second quarter economic growth potentially coming in at less than 1% annualized. Numbers due out in the week ahead should help clarify whether the slowdown is for real this time.

I ran in a local 5K race over the weekend. As the assorted participants milled around at the start, I noticed just how many of them looked on the young side. But this happens more often these days –every year there are more runners younger than me and fewer that are older. And so I huffed and puffed my way around the course, breathing in the dust kicked up by the heels of some young teenager in front of me.

One of the great lessons of history is to avoid slavishly applying the lessons of history. A particularly tragic example of this relates to the First and Second Gulf Wars. The relative ease with which U.S. and Allied forces dislodged Saddam Hussein from Kuwait in 1991 emboldened the U.S. to undertake the far more difficult task of overthrowing Hussein altogether and occupying Iraq 12 years later. Apart from its terrible human toll, the negative results of that second conflict are still being felt today, both in the U.S. and throughout the Middle East.

The U.S. economy of 2019 is, for the most part, a very healthy one and this is fully reflected in the valuations of stocks and bonds. However, it is a complex environment for the implementation of monetary policy.

The week ahead will see a flood of data which will amount to an all-systems check on the investment environment. The numbers are likely to be positive. However, for investors this should not be seen as a "go for market launch" but rather as a cautious OK for a more pedestrian advance.

Just over eight years ago, HBO launched its very successful series, "Game of Thrones," set in the mythical medieval kingdom of Westeros. The first episode was entitled "Winter is Coming," and we were warned that winters in Westeros were particularly harsh and could last for years.

For most of the United States, April 15 is the day when annual tax returns are due and every year, at around this time, the Tax Foundation announces "Tax Freedom Day." The idea behind Tax Freedom Day is to recognize that every year a sizable chunk of Americans' income goes to pay federal, state and local taxes.

In a narrowing road, it is best to stick to the middle. And in the spring of 2019, the U.S. economy is moving steadily down the middle of a narrowing road.

After a downhill cascade in the fourth quarter, global risk assets have staged a steep assent in the first quarter of 2019 and, this being the case, as we move into the second quarter, it seems like a good time for investors to think about the outlook.

In the golden age of Hollywood, before the era of special effects, the success of a movie depended to a large extent on the storyline. One frequently used construct was the wrongful arrest of an innocent person.

All my life, I have been running against clock and calendar. I pretend to hate the frenzy and wish for more flexibility. But the truth is, I couldn't really work any other way. Deadlines force decisions. Deadlines require efficiency. Deadlines provide clarity.

Friday's Jobs report was essentially "wheels down for landing" on this long economic expansion, as the economy tries to navigate a smooth transition from 3% growth to a more sustainable 2%. However, given the volatility in the data, the passengers are understandably nervous.

Should an overweight man, with elevated cholesterol, eat a 32-ounch steak? Probably not, you might say. Provided he stays comfortably seated in his chair, no short-term problems may ensue. However, in the long run, it is clearly risky and, even in the short run, some obviously negative effects are being masked by the fact that he is sitting, rather than engaging in vigorous exercise.

One of Charles Dickens’s most lovable characters, Mr. Micawber, offered a young David Copperfield sage advice on personal financial management. Spending sixpence under your income causes no problems, but spending sixpence over can set you on the road to ruin.

In the last scene of Sydney Pollack's beautiful movie "Out of Africa," two lions gather on the hero's grave and look out at the cattle on the plain below. It is a princely scene — an assumption that the animals below are somehow the property of the lions, to consume whenever they feel hungry. For some reason, I was reminded of this scene this week, as politicians from both parties decried what they saw as corporate bad behavior and proposed measures to fix it.