Outlook for April 2017

Q1 wrapped up with more disconnect between the fundamentals and the performance of equity markets. There are plenty of very questionable areas of the economy which are being widely discounted as investors are herded towards the edge of the cliff. The mantra has been to remind everyone that There Is No Alternative (TINA), and US stock market is the only place to invest if you want to make any money. That playbook has been going on for a while, as the focus shifts from monetary policy to fiscal policy. The Trump administration has failed to deliver on any of the promises so far, and it will be interesting to note when the investors’ patience will run out.  

Outlook for April 2017

The Fed raised the interest rates as expected in March — a move, which was pretty much priced-in and the Fed’s hand was pretty much forced at that point. The move has left the question of what the rest of the year brings. The tone has been dovish for the rest of the year — promising two more raises instead of the three that was expected. Whether even that’s possible remains to be seen.

I, on the other hand, am more interested in seeing how the debt ceiling debate goes. The US will hit its debt ceiling (again) in the coming weeks and will need to be raised. It is not a question of whether they will raise, but by how much. How far will the can get kicked down the street? The modern monetary system is built on debt and debt ceilings have to keep climbing as the financial system will otherwise collapse. This raise in debt ceiling will have effects on a lot of things of course, as we borrow from future debt-laden generations and will eventually start chipping away at the value of US currency — which is what the Fed really wants — based on their inflation target. According to a recent CBO report, the total US debt is expected to double in the next three decades. All this is of course great news for inflation hedges such as gold and silver, which hold their value as the paper currencies lose purchasing power.

Not only do the precious metals give my portfolio the insurance that it needs, but being in the second year of a new bull market has provided with me some lucrative growth opportunities. Yes, its a volatile sector, but when you invest early on in a bull market, there is more room for error as I investigate and invest in little known companies outside the mainstream space. The exposure has proven to be very good for our portfolio overall as both precious metals have outperformed (Silver up 13.82% and Gold up 8.06% YTD) the broad equity market. When you take the precious metal equities, which are leveraged to the underlying commodity, the returns are even more magnified.

Looking for some investment ideas? Be sure to check out the Top 2017 Investment Picks from the blogging community.

Our current portfolio looks like this:

As it stands, our portfolio diversification is as shown below.

What is your outlook for April 2017? What are your thoughts on the stocks mentioned here? Do you own them or are they on your watchlist? What do you think of the current market levels and buying here? Make sure to leave a comment below.

Disclosure: Our full list of holdings is available here.

8 thoughts on “Outlook for April 2017

  1. JC says:

    It should be interesting to see how everything plays out. I have to say that I’m surprised that we haven’t seen a modest pull back in the markets after the Trumpcare fiasco where his first big campaign promise failed miserably. Granted it was a horrible plan, but still. After that I figured we’d see the markets pull back as they wouldn’t be quite as optimistic about all of his other grand campaign promises going through: namely tax cuts for individuals and businesses, repatriation tax holiday and a huge infrastructure bill. That isn’t the case quite yet. In my view it still seems like the market is pricing in the rest of these things as absolutely certainties given the shift in valuations since his election and since he’s already talking about having to court more politically central Democrats to get things passed because there’s so many Republicans that won’t support him that says a lot about the political division right now.

    As for me and my investment plans I don’t have much as far as long term positions that I want to buy. I really need to sit down and examine some of my holdings to see if they make sense as long term holds whether due to business fundamentals or due to position sizing and that the capital could be put to better use elsewhere. I’m just going to keep sticking with using options to generate some income in the meantime while I wait for better valuations.

    • Agreed, JC. The market is pricing in the best case scenarios and is giving Trump more time to get things passed. What will come from it, who knows. The Republicans cant seem to stop the infighting and get any work done in DC.

      Thanks for sharing your thoughts
      R2R

  2. After a 1K loss last summer, I decided to stop having an opinion on the market…
    That being said, I keep gold and mines in our portfolio, as they are a good insurance against bad times. And they are coming: it is just unclear when…

    • The market always teaches you a lesson when you think you have it all figured out 🙂 Its always good to hedge your bets and have some insurance in case things turn sour.

      R2R

  3. Thanks for sharing your thoughts R2R. I also expect a decent move in precious metals and an inverse move in the dollar, once the deficit spending budget discussion gets going. Trump has already made it clear that that’s his game, and it should make for another leg higher in the PM space. The Fed could of course counter that move, if they were to cut their balance sheet and continue to raise short term rates, but that seems unlikely in the face of dysfunction in Washington.

    I have enjoyed that the yield curve has been flattening in the US, and think bond investors are correct…..and the US economy isn’t as strong as the economists expect. GDP and so forth is a lagging indicator……so I’m not expecting the discussion to be settled for 5 or 6 months.

    Global equity markets remain very elevated in my opinion, with margins too stretched for my comfort. Either earning will need to grow substantially or stock prices will come down, in order for the system to rebalance. In general, all we’ve been doing is trading around our core positions…….both in the healthcare space and the precious metal space. Amusingly enough, we bought our first new dividend stock in almost a year….last week. I have a post coming out tomorrow talking about which company and why now.

    Happy bargain hunting R2R. Look forward to catching up later this week.
    -Bryan

    • Doubt if the Fed will unwind their balance sheets. They are resorting to sneaking those things in without making a big announcement. Lots of moving parts and you never know where the next crisis will come from.

      Thanks for stopping by and sharing your thoughts
      R2R

  4. I feel a correction is coming, but have no clue when. The markets definally seem overpriced and i find my portfolio basically going sideways recently. Before we got into stocks I bought a lot of physical precious metals (gold but mostly silver since the gold/silver ratio is way out of whack). We still have them. Its great insurance. The downside is no dividend or passive income. It just sits there and looks nice. haha. I’m going to continue monthly buys just try to find the better values.

    • Haha…ive been talking about a correction since last summer, but it never comes 🙂

      Anyways, Ive come to terms with it and dont even care anymore. I am happy participating in the new precious metals bull market — so, my take on teh rest of the broad equity market is neutral for now. But I hear you. Lots of issues that need to be fixed that investors are discounting these days.

      R2R

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