One would be rightly upbeat about an economic climate that shows the number of jobs available is 40% higher than the number of unemployed people. That sort of climate encourages people to spend money because they tend to feel secure in their jobs and also secure in the feeling that if they should lose a job, they can easily find another one. One would also be pleased about the second look at Q1 GDP being at 3.1%. That’s one tenth of a percentage point down from the first estimate but still very strong for sure. Fed forecasts for Q2 are lower than the Q1 number but it’s worth noting that the preliminary Q2 estimates have already been raised a couple of times.

Comforting news there, so what’s the problem? We suspect it is a combination of the ‘T’ word and the ‘I’ word.

The ‘T’ is obviously for Tariffs. It now appears that a favorable deal with China is not exactly right around the corner. We are still of the mind that a deal will be reached but it likely won’t be done quickly. A new wrinkle is in the exotic world of Rare Earths; elements in high demand and low supply. China has about 35% of the world’s supply. There are hints that China will use this fact as leverage. And speaking of leverage, President Trump has told Mexico he may slap them with tariffs if they don’t plug that leak on their southern border.

The ‘I’ word is Impeachment. Bob Mueller this week gave a brief appearance to announce the Office of Special Counsel was closing up shop. It was billed as a press conference but it wasn’t that because no press people got to ask any questions. Mr. Mueller attempted to explain that he and his staff of 40 lawyers just weren’t sure whether actual laws had been broken by Mr. Trump so if Congress thought there were, well it’s up to them to do something about it.

That brings us back to the ‘U’ word: Uncertainty. Never a good thing.

Ron’s Market Minute 5/31/2019 — Red Hot Tariffs! Get Your Tariffs Here!

As mentioned above, in an effort to encourage Mexico to take effective measures to stem illegal immigration — that finds its way to the US border — President Trump is threatening our neighbor to the south with tariffs. According to presidential tweets, Washington will impose a 5% tariff from June 10 and the tariff amount would rise, possibly to 25% — depending on the level of Mexico’s response to illegal immigration. Mexican president Andres Manuel Lopez Obrador (known affectionately as ‘Amlo’) has responded by saying he would respond with ‘great prudence’. We’ll have to wait to find out what that means.

One reason why this has the markets roiled is that many have been looking to Mexico as an alternate supply chain to replace (in full or in part) China, if that deal doesn’t work out.

All we can say at this point is ‘This too shall pass.’

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk

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