Opening Statement from the September 2019 Dividend Gems

Opening Statement from the September 2019 Dividend Gems

Originally published on September 15, 2019

On the brighter side, the US economy remains relatively strong, with robust consumer spending, very low unemployment, respectable GDP growth, low inflation and low interest rates.

But even the US continues to weaken as a result of trade uncertainty in addition to the waning impact of the fiscal stimulus. Notably, the recent consumer sentiment data from August recorded a revised 3-year low. 

The earnings picture in the US has been solid but is facing trade-related headwinds in 2019. US corporate earnings thus far in 2019 have yielded no growth, but are expected to rebound in the second half of 2019. This in itself could add to the pessimism as we believe neither corporations nor analysts have adequately reduced earnings estimates to account for delays in trade resolution.

Since the Federal Reserve Bank cut interest rates by 25 basis points for the first time in a decade on July 31, 2019, we have seen no less than 16 other central banks cut rates. We believe this to be the beginning of what the future holds. In short, we expect several other nations to cut rates in the next two months.

When the Fed meets on September 18, it could very well cut rates again. We believe another rate cut this soon would be a huge mistake because it would further accelerate the interest rate cut cascade seen throughout the globe. This could led to...