A couple of weeks ago, the Bull saw a possibility of the stock market breaking out of the upper end of the trading range we have been in since early 2018. Unfortunately, the averages got pulled down into the range by fears of slowing economic growth and more political uncertainty; the presidential impeachment investigation certainly added to the daily Washington din.

The U.S. economy has slowed. The trade war with China has been largely responsible. Tariffs hurt the consumer as well as the seller. The recently reported manufacturing index hit a ten-year low. The number may have been exacerbated by the GM strike and Boeing’s inability to deliver new 737 Max models to buyers. However, manufacturing had begun slowing well before this. The services sector growth rate is also slowing, but still modestly expanding. This is important because this sector is approximately 70% of our economy.

What does all this mean for investors; bogged down growth. Traders, business managers, and increasingly, the public just do not know what to make of the current environment.

Conditions are still mostly good, but the growing uncertainty promotes hesitancy, if not outright negativity. The Bull has been doing some modest selling; using the opportunity to offset some of the gains taken earlier in the year. More may be done.

The Bull and his herd do not believe the U.S. economy is going into a recession. The most likely outcome is a muddle through economy, bolstered by low interest rates, low energy prices, lower tax rates, high employment and growing wages. In addition, housing activity has been increasing; an important driver of business activity. However, there are risks and a more cautious approach is called for. The stock market has probably over-reacted and the averages are merely declining back into the established trading range. Stay steady, my friends.

The Lonely Bull