The Markets – U.S. equities ended the month of April up a bit with a monthly gain of 1.05% and a year-to-date gain of 6.49%.
Washington – As we greet May here in San Antonio with traditional Fiesta parades, NIOSA, and other celebrations, we can rest easy, congress managed to strike a deal to fund the government, at least until September. Why is it so important to fund the government? A partial shut-down occurred for 16 days in 2013. The estimated cost to the federal government was upwards of $2 billion and reduced gross domestic product by 0.3 percentage points – the equivalent of tens of billions of dollars in lost productivity. Did you know, that since 2009, Congress has not met the October 1 deadline to pass an appropriations bill on time? Not one time.
The Fed –Recent jobs reports continue to reflect a growing economy. That said, the Fed is expected to continue raising rates perhaps as many as 3 more times this year. As I mentioned last month, the Fed has now begun to address how they reduce their own balance sheet- by not buying U.S. Treasuries and allowing the ones they own to mature. Why does this matter? In short, with the Fed no longer a purchaser, the treasury market will be minus one very large buyer which will have some effect on rates. Just how much is yet to be seen. However, the expectation is that prices may drop which will cause rates to increase, which affects all sorts of lending rates from autos and homes to corporate lending. Only time will tell for sure how much this will affect the U.S. economy.
Headlines- We still remain very concerned about North Korea and Syria. As we stated last month, China really does not want a democratic regime on their border and they know that is the likely outcome should President Trump and Congress decide to strike North Korea. China has urged Trump to proceed cautiously. We suspect there is some pressure on China to remove Kim Jong-un. Simultaneously, it has been said that Russia has selected a general to replace Bashar al-Assad, when the time is right. Trump is playing a game of chicken with Russia. Putin wants any action in Syria to be his idea and not appear to be bowing to Trump. Trump, on the other hand, appears to not care about allowing Putin to save face.
Book recommendation: StrengthsFinder 2.0 from Gallup by Tom Rath.
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