Is The Federal Reserve Stuck Between A Rock And A Hard Place?

On this morning’s show, Karl & Trey talked about the ongoing trade war and how while the economy is slowing, it’s still moving forward and in the right direction.

Trey Ware:                         Karl Eggerss is here to join me now to talk about what’s going to be moving forward. And Karl, you have a new title. Can you explain that to me real quick? Explain that to our listeners so they understand where you’re from and what the story is now.

Karl Eggerss:                      Yeah, thanks for giving me the time. Basically, Eggerss Capital Management’s experienced a lot of growth the last several years, in due part due to the KTSA audience. And because of that, we needed more infrastructure and so we have merged with another San Antonio based firm named Covenant, and we’re really excited to give a lot of tools and tips and resources continue to the audience. And so I’m basically a Partner there and a Senior Wealth Advisor, so my role here will continue to be the same in terms of the information I bring to the audience, and keep doing what I’m doing but be able to bring a lot more resources to the table now. So really excited about that.

Trey Ware:                         Right on. So now you’re Karl Eggerss from Covenant?

Karl Eggerss:                      Correct, exactly.

Trey Ware:                         Okay. All right, very good. So, the tariffs are not going to go into effect in Mexico, on Mexico today. That’s got to be good news for the stock market. How do you think it’s going to respond?

Karl Eggerss:                      It’s trending up a little bit because of that, but also we got a weaker jobs report. You know I’ve been talking about that we’re seeing a little bit of momentum slowdown in our economy the last several weeks and we’re in this weird period. It’s typically like this where the bad news is good news. In other words, the audience and the investors are watching the Federal Reserve; they’re saying, oh good, a bad jobs report or less than expected jobs report. That means the Fed not only is not going to raise interest rates-

Trey Ware:                         Might cut ’em.

Karl Eggerss:                      They could do what President Trump wants and they may cut interest rates. Well, that sounds good because we all can borrow cheaper, but also for the listeners that are in savings accounts, CDs, money markets, it’s not good and it also tells you that they may be worried about something else coming down the road in terms of a recession, so they’re trying to prevent that by lowering interest rates.

Karl Eggerss:                      The problem is, is that if the stock market keeps going up here, which it is right now because of that, and they don’t lower interest rates next month, which there’s a high probability the market’s pricing that in now, then it gets disappointed and then down we go. So we’re in this weird area where if we get a really strong jobs report or a really strong any type of economic report, you could see the stock market sell off because they’re not going to cut interest rates.

Trey Ware:                         Do you have any doubt in your mind, though, that the underpinnings, the economy is still very strong? Knowing that economies go up and down, and we haven’t had a down in 10 years, do you still believe that it’s still very, very strong?

Karl Eggerss:                      I do. I’ve been saying lately we’ve been calling it good but not great, and all that simply means is economies cycle. This economy’s been good and getting better the last couple years. It’s been accelerating and it’s been doing that from ’08, and it’s gaining momentum, and so it ebbs and flows. And so because we’re going through a slowdown, everybody’s mind wants to immediately go to 2008 and say we must be going into a financial crisis. The Fed needs to help us, the government needs to do something when economies just ebb and flow; they slow a little bit, they speed up a little bit. And so we’re going through a little bit of a soft patch, but that’s very different from a recession.

Karl Eggerss:                      And the recession, even if we did have one, which is perfectly normal, that’s very, very different from a financial crisis. So we’re going through a little bit of a slowdown, but again, we’re still moving forward, Trey. This is not an economy going backwards. It’s going forwards; it’s just compared to where it was six or nine months ago it’s a little slower than it was probably because some of those, some of that stimulus had worn off from the tax cuts. But my problem is everybody says what’s the government going to do next. They’re looking for a fix from the government, they’re looking for a fix from the Federal Reserve.

Trey Ware:                         Right.

Karl Eggerss:                      What we really need is less regulation. We need to… 

Trey Ware:                         More free market.

Karl Eggerss:                      Yeah, exactly. More free markets. And that’s what gets the economy going for the long term and helps all of us out.

Trey Ware:                         Well, even with the numbers at 75,000 that came out on Friday, it was still very heartening and very positive to see that there are still more jobs than there are people to fill those jobs, and that’s good for American workers.

Karl Eggerss:                      That’s right.

Trey Ware:                         Karl, I’ve got to let you go. Karl Eggerss from Covenant now. He’s joining us every Monday at this time to talk about what’s going on with the economy and the jobs numbers, etc.. Thank you, Karl.

Disclaimer

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Covenant Multi-Family Offices, LLC (“Covenant”)), or any non-investment related content will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Moreover, you should not assume that any discussion or information serves as the receipt of, or as a substitute for, personalized investment advice from Covenant.  To the extent that a LISTENER has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Covenant is neither a law firm, nor a certified public accounting firm, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of our current written disclosure Brochure discussing our advisory services and fees is available upon request or at www.covenantmfo.com.

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