On this morning’s Trey Ware Show, Karl & Trey discussed what effect another government shutdown might have on the financial markets.
Trey Ware: Let’s see what’s going on in money news this Monday morning at 7:20. Karl Eggerss, EggerssCapital.com is joining us right here on KTSA. Morning Karl.
Karl Eggerss: Morning Trey. How are you?
Trey Ware: I’m well. What is the big money news story of the day?
Karl Eggerss: You know, it’s the same stuff that we’ve had. It’s just it’s very fluid, so number one on the list is obviously China. We’ve got this March 1st deadline and we saw a little bit of rhetoric last week between the two, basically saying we still have a ways to go before a “trade deal”.
Karl Eggerss: And then, we do have negotiations continuing this week, so the markets are continuing to move on these headlines. If it’s a negative headline saying we have a ways to go, the market drops a little bit. If we have a headline that says we’re making progress and we’d like to get the deal done sooner rather than later, the markets rise a bit.
Karl Eggerss: But we have had a very persistent stock market, but the news is driving it just a little bit, and then obviously we have the shutdown, 2.0 potentially, and I think, you asked me would the shutdown have any effect on the markets and I said no originally. I think if it happens again, this time it would have an effect on the markets because again, it’s just showing that we’re taking one step forward and two steps backwards.
Trey Ware: So, what kind of effect do you think it would have?
Karl Eggerss: A negative effect, because again, you would think we opened it back up. We’re making progress, but obviously if you looked over the headlines from the weekend, there doesn’t seem to be much progress in some of these talks and neither side seems willing to compromise very much.
Karl Eggerss: And so having said that, another shut down is likely. I hope that doesn’t happen, but it is likely and I think the markets, Wall Street would not like that.
Karl Eggerss: So again, short term turbulence, but long term we still have very good profits happening in this country. We have very good employment, and so I think this bull market does continue and there’s a lot of people that were kind of scared out of the market in December and now are kind of going, what do I do, how do I get back in? And that’s really the trouble with trying to take every little news bit that comes our way and trying to trade around it.
Trey Ware: So the Democrats are now talking about tax hikes in the 2020 horizon. They want to go back and they not only want to restore the tax cuts that happened over the past two years, but now they want to add to those tax hikes. They’re talking about taxing some of the wealthiest up to 90 percent of their income, but also taxing everyday middle America as well with higher tax rates. Do you think that would have a negative effect or how would that play out?
Karl Eggerss: Trey, come on. You’re tossing me a softball, and you know the answer, right? So the answer is yes. It would be a negative effect. I mean, we saw the opposite, right? We saw tax cuts last year go through and you saw the effect not only on profits of companies, but we’re seeing it with employment.
Karl Eggerss: Look at the employment figures, and so as this continues to flow through our economy, yes, these tax cuts do definitely help and tax hikes will definitely hurt and again, you may not see it in the immediate short term, but there’s no question that you will see it in the long term.
Karl Eggerss: And look tariffs are doing the same thing. I’m already seeing, I have clients email me about businesses and saying here’s a direct issue going on with tariffs and how it’s affecting my business.
Karl Eggerss: So tariffs are a tax and I hope that doesn’t kick March 1st, and higher taxes is a tax and I hope that doesn’t ever happen as well. So let’s keep the momentum going that we have not only in our economy but the markets and not disrupt it.
Trey Ware: Karl Eggerss from EggerssCapital.com. Thank you Karl. Appreciate it very much.
Get our latest market commentary by subscribing to our blog here.
To subscribe to the Eggerss Report via the Itunes Store, click here.