May Showers

April showers bring May flowers and like other months, there is a long list of economic statistics due this month. Beyond economics, May is also National Salad Month, National Egg Month, National Barbecue Month and Zombie Awareness Month (among others). One big item will be on May 7th when France will hold their second round of Presidential elections. The markets will be watching to see if the old axiom holds “marry in May and you’ll rue the day.” Will France be led by a president that will stay in the EU or one that could Frexit?

May also marks the month Californians will have their tax Freedom Day. As of May 1st, Californians have earned enough money to pay their tax bill for the year. Speaking of taxes, the Trump administration released a skeletal outline of their tax plan. Below are highlights:

  • Three tax rates 35%, 25% and 10% – down from seven levels today
  • Elimination of the Alternative Minimum Tax
  • Corporate tax from 35% to 15%
  • One-time (low) tax on overseas profits
  • State and Local income taxes will no longer be deductible on your Federal tax return
  • Elimination of most deductions except those for mortgage interest and charitable contributions.

There are good and bad aspects to the proposed plan, and we will not be holding our collective breaths for this plan as it is proposed. Market movements seem to suggest that participants approve the plan, we caution that there will be a long road ahead which may include strong opposition.


S&P 500 source:
April was basically a flat month, until the last week as markets appear to be reacting positively to France and the Trump tax plan, but neutral on Korea at this time. Therein lies the weakness of market timing. We have always believed that it is time in the market rather than the timing of the markets. Many Americans will not be effected by the markets as the Economic Policy Institute (EPI) reported that the mean retirement savings for a family between 44 and 49 years old is $81,347. As low as that number appears, that does not tell the whole story. To compute an average, there are family’s with zero savings and there are those that are super savers. The EPI reports that median (those at the 50th percentile) may be a better gauge. The median for families between 44 and 49 is only $6,200. That is scary. There will always be problems/issues in the market and the economy, but that should not hold one back from saving. We never want our clients to be average.

The bond market is showing that investors have been looking to reduce risk. Investors have been disappointed with the delay in stimulus coming from Washington, the Federal Reserve is shrinking its balance sheet and geopolitical issues appear to be an influence on risk appetites. North Korea testing weapons and the atrocities in Syria have created uncertainties as the world has no good idea how the Trump administration or other global leaders will handle these tensions. Back in May of 1804 Napoleon Bonaparte crowned himself the emperor of France when he took the crown from the Pope and put it on his own head. The Supreme Leader of North Korea, Kim Jon-un has not yet declared war like Napoleon, though the situation will need to be dealt with.

On the positive side, consumer confidence has continued to move upward as shown below. Corporate leaders are looking at a more business friendly environment, which is leading to confidence and this confidence should lead to more capital expenditures and hiring. Early whispers are implying that a large percentage of companies could beat earnings expectations.

Over and Out
We will end with the fable of six blind men and the elephant. The story is about six blind men who all touch an elephant to understand what it is like. Each man has a different perspective, one may be touching the tail, the other a tusk and another a foot. The point is that just like the blind men, we all have a different perspective on markets/politics/fill in the blank and those will all come from our own distinct vantage point. The elections in France may surprise us just like Brexit did a while back. Even with the media believing in a wave of populist sentiment, four elections since Brexit have not gone that way; Spain, Austria, Netherlands and Possibly France (although the pollsters have been wrong before). As we look back, the economy and the market tend to have a greater impact on politics, than politics has on the markets and the economy. We aim to keep you disciplined and focus on the long term while dismissing the market noise.


Morgan R. Christen, CFA, CFP®, MBA Chief Executive Officer


* Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio.

CPI data are available from the US Bureau of Labor Statistics. Stock is the capital raised by a corporation through the issue of shares entitling holders to an ownership interest of the corporation. Treasury securities are negotiable debt issued by the United States Department of the Treasury. They are backed by the government’s full faith and credit and are exempt from state and local taxes. The indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results, and there is always the risk that an investor may lose money. Diversification neither assures a profit nor guarantees against loss in a declining market. The information contained herein is based on internal research derived from various sources and does not purport to be statements of all material facts relating to the securities mentioned. The information contained herein, while not guaranteed as to the accuracy or completeness, has been obtained from sources we believe to be reliable. Opinions expressed herein are subject to change without notice. Charts from Charles Schwab and Factset, Conference Board economic Policy institute tax freedom day

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