The Investment Coach

A number of years ago my wife and I were vacationing in Canada. On July 1 that year, we were at the Fairmont Banff Springs Hotel. July 1 is Canada Day, commemorating the establishment of Canada as a country, July 1, 1867. Along with Canadian guests, we were invited to a Canada Day reception at 3 p.m., with champagne, birthday cakeand a choir singing “O Canada,” the national anthem.

Three days later we were at the Fairmont Chateau Lake Louise Hotel on July 4. Same thing, a reception for American guests and others at 3 p.m. with cake, champagne and a choir singing all four verses of the “Star-Spangled Banner.”

The Americans looked at each other quizzically, “There’re four verses?” Yes, there are, except generally only the first verse is sung.

In 1895, a fictional Irish-American character created by writer Finley Dunne uttered a now famous quote, “Sure, politics ain't beanbag. ‘Tis a man’s game, an’ women, childer, cripples an’ prohybitionists ‘d do well to keep out iv it.”

The tiff between President Trump and Canadian Prime Minister Trudeau “ain’t bean- bag,” nor pretty, and Mr. Market prefers civilities while abhorring trade disputes.

The real story is a remaking of the post-WWII order. In 1946, most of the industrial world had been reduced to rubble. America was King of the Hill. Part of the impetus for WWII was the total humiliation of Germany after WW I. We decided to help rebuild the economies of former enemies, and those of allies with favorable trade concessions and with America footing most of the bill for defense against the spread of Communism.

Today, the world largely is rebuilt with other national competitors increasingly strong. With America running growing financial deficits, President Trump wants our allies to pick up more of the tab for their own defense. He also wants fair trade as we no longer need to give robust competitors an unfair edge.

For example, Canadian tariffs on U.S. dairy products vary from 241 percent on fluid milk to 298.5 percent on butter, an average of about 270 percent on a range of dairy products. Donald Trump won Wisconsin’s 10 electoral votes with a narrow victory over Hillary Clinton, 47.2 percent to 46.5 percent. It was a squeaker and we may assume that as mid-term elections approach, Mr. Trump hears Wisconsin dairy farmers who resent Canadian tariffs.

Cars imported into the U.S. from the European Union (EU) face a 2.5 percent tariff. Conversely, U.S. made cars imported into the EU are taxed at 10 percent.

The World Bank projects that India will be the world’s fastest growing economy for the rest of the decade. Indian goods imported into America are taxed on average 2.4 percent. However, India taxes imported U.S. goods on average 9.4 percent.

There’s a 100 percent tariff on a Harley-Davidson motorcycle imported into India. American motorcycles face high tariffs in Thailand (60 percent), China (30 percent), Malaysia (23.3 percent). Harley-Davidson is headquartered in Milwaukee, Wisconsin. Bet they have the president’s ear.

The U.S. accounts for about 20 percent of all Chinese goods exports, whereas China buys only 10 percent of American exported goods. We want Chinese support on dealing with North Korea. A trade war with China serves no one’s interests. While the back and forth is unsettling, Wall Street regards the posturing as part of “the art of the deal.” Trump did propose that nations get rid of all tariffs with truly free trade. That would be interesting. Politics ain’t beanbag.

With the economy skirting 4 percent annualized growth, corporate earnings strong and stock buybacks forecast at record levels, the market has some strong supports. Much of the enthusiasm already is baked into the valuation pie so a big upward surge is not seen.

Markets may wobble going into the fall elections, but some pundits are talking Dow 26,000 by yearend. Interest rates are rising with the 10-year Treasury note at 2.948 percent as of June 14 with Kiplinger forecasting 3.3 percent by yearend. While rising rates are headwinds for stocks, rates in the 3 percent range are still lower than longer term averages in the 5-6 percent range.

Employment is up along with consumer confidence and spending. De-regulation and tax cuts are positive elixir. You never know when some short -run development wallops equities, but I think you can safely watch the sea go by from your deck chair, with gin and tonic in hand, while not worrying about your portfolio.

Enjoy your summer and your travels!

Lewis Walker, CFP®, is a financial life planning strategist at Capital Insight Group; 770-441-2603. Securities and advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker is a registered representative and investment adviser representative of SFA which is otherwise unaffiliated with Capital Insight Group. He is a Gallup Certified Strengths Coach and a Certified Exit Planning Advisor (CEPA®).

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