The Shutdown’s Over… Now What?

On this morning’s Trey Ware Show, Karl discussed the government shutdown and the impact on the economy and the stock market.

Trey Ware:                         Talking about a little money like we do on Monday’s at this time. This new poll out from the Wall Street Journal, NBC, says, 51% of Americans approve of president’s management of the US Economy, according to this latest poll. That is actually up. People … More and more people are starting to like the economy and like what he’s been doing with the economy. They’ve given him the credit for it, the growing popularity of his economic policies have defied predictions because they were saying that everybody was going to turn against him, due to the stock market turmoil that lasted from October through Christmas eve of 2018. Is that turmoil still there as things kind of leveled out? Let’s get with Karl Eggerss from Eggersscapital.com. He’s on the Stevens Roofing Newsmaker hotline. Good morning Karl.

Karl Eggerss:                      Good morning Trey. How are you?

Trey Ware:                         I’m very well, thank you. Has it leveled it? Are things better than they were in the fourth quarter?

Karl Eggerss:                      Well, the stock market is. I think the economy … We talked last week about China slowing. We have problems in Europe. The U.S. is slowing a bit. The key though is looking at what these companies are saying. We had a profit warning this morning from Caterpillar. So far, the earnings have been pretty good over all. What’s interesting is, Caterpillar didn’t say that their revenue was bad, which is their demand, right? They were saying that their profits weren’t great, which means their costs are going up. There’s some other issues related to, could be tariffs, could be management. We don’t know. Again, we need to watch what these companies are saying going forward.

Trey Ware:                         Well, it could be personnel, because we’ve got a situation now where the jobs picture is so good in this country that companies are having to pay people more now.

Karl Eggerss:                      Well, that’s it. There’s a big fear on Wall Street that we’re having to … This is kind of, an exaggerated term, but kind of, a stagflation, meaning, the economy may be slowing down, but we may have inflation, where people are … Yeah. We have full employment. I mean look, people filing for unemployment came out last week at its lowest level since 1969. That’s not going to stay like that, but we have a very tight labor market, which means people can demand raises. They have the upper hand in terms of employer to employee.

Karl Eggerss:                      Having said that, yeah, this is putting some pressure on companies. And then, when you throw in potential tariffs, you know, that’s kind of, a bad combination. I think President Trump has been using this strong economy, that we did have last year and into this year, as kind of, a negotiating tool here to say, “Look. I’ve got a little, bit of wiggle room, because China’s economy’s slowing faster than ours.” He’s still pushing these tariffs, which I don’t like the tariffs … We said this. We need something to be done. I think he’s using them as a negotiating tool. So far, seems to be that China’s willing to play ball. We’re here in little positive movement’s coming out of U.S. china trade talks.

Trey Ware:                         The shutdown and now that the government is reopened, has that had an effect on the stock market? Has it had an effect on the economy over all? What do you think is a response going to be after the government opens today?

Karl Eggerss:                      Well, we don’t know the effect on the economy yet. There’s a lag of what happens for those 30-some odd days, but we do know ironically … You asked me originally, when the shutdown came, what would happen. Is there effect on the stock market? I said there wouldn’t be. I was really wrong on that. Actually, there was an effect. The stock market went up over 10% during this shutdown. It was kind of ironic, that the shutdown, again, didn’t have any effect on the market. If anything, it was a positive. I think those two things were not related. There was improvement going on with the stock market, even though the shutdown’s happening, but we do need to see what this lag effect’s going to be.

Karl Eggerss:                      I mean, people were saying, “Look, if the shutdown continued, we could see growth go all the way down to zero for the first quarter.” We’re going to get jobs report Friday. That’s kind of the next big thing. We have one quarter of the company and the S&P reporting profits this week. That’s going to be where people are going to see perhaps their portfolios start to move, a little, bit more. This is the time trade that investors really need to look in the mirror and say, what did I do over the last six to eight weeks? You could make some big, big mistakes if you let your emotions get involved over the last six to eight weeks, you’re given what the market’s been doing with volatility.

Trey Ware:                         All right. Thank you Karl Eggerss. Eggersscapital.com. As always, Monday at this time.

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