Tag Archives: economy

Jun 13 2025
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Urgent update

Israel strikes Iran

Good morning, last night Israel attacked Iran’s nuclear and military targets.  We will not be discussing politics, or the optics of what happened, instead we would like to share with you our opinion on economics and market outcomes from the attack. 

The first reaction is a much higher oil price, based on the risk of war plus the mechanism for importing and exporting oil.  One-third of all oil passes through the strait of Hormuz. Unfortunately, this flow of oil can be majorly disrupted if Iran chooses to block or attack ships passing through the region.  The US maintains a large naval fleet in the area. The markets have now attached a risk premium to the price of oil that will stay until this conflict is resolved or clarified.  Additionally, the futures are pointing to a downturn today. Stock markets usually overreact to major events with the attitude of: “shoot first and ask questions later.”  Depending on what actions take place next by Isreal or Iran, it may continue for a little while. 

We are monitoring all actions in case we might have to adjust allocations. Today will affect your portfolios in the short term. However, at this time, no action needs to be taken. Pragmatically, Isreal’s and Iran’s percentage of global GDP is a little over 1.28% combined.  While the perception of trade shutting down will impact markets, the long-term impact will be de minimis because of the percentage of Global GDP.

If the situation persists and escalates quickly, markets will deteriorate. If an all-out war breaks out in the region, it will obviously affect everything in some way. Please remember, the action taken by two foreign countries is a force majeure, and not a natural economic decline.

Any questions or comments please feel free to call and discuss

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Apr 07 2025
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Panic and Valuation – A game of chicken

The markets are looking to open down again as the US administration offers no tariff concessions. We have espoused the markets were expensive for a while and earnings need to grow into the valuations. One of the main ingredients when looking to buy or sell stocks or an index is the price earnings ratio (PE). That is calculated by taking the stock or index price and dividing it by the earnings. As example. If the S&P 500 was trading at 10.00 and earned a 1.00 the price earnings ratio would be 10.

The dramatic fall in stock prices this past week have brought us down to about 16 x price earnings (P/E} ratio for 2026. The is well below the 10-year average of 18 and is about at the 20 year average. Today the markets will open at about 15 x 2026 earnings. This is a valuation that we have not traded on a fundamental basis in years. From a technical perspective, the markets are oversold on a short-term basis.

This is not an economic secular decline. While we understand the risks of a prolonged tariff war, we believe that this is a force majeure and the US, and the China tariff will eventually get resolved. The question is: When? According to reports, 50 countries have come forward to negotiate. We can’t imagine this lasting all year. If it does, this would put us in a recession. The price earnings multiple and the markets could go lower as it did in 1974 (8.5 x earnings), 2002(11x earnings), 2009 (8.5 x earnings), and 2020(11 x earnings).  We are not suggesting that we go to those valuations, as those were anomalies. The markets are at their historical long-term average. If the economy weakens, we could see a further downside. Please understand that those who bought during those times did very well over the long run.

We are not calling a bottom as there is no clear winner in this game of chicken. It is very hard to catch a falling knife.  What we are saying, because of current valuations, this is a much better time to start dipping the toe into the proverbial water at these valuation levels, than it was just two months ago. One way to do it, is if you have 100 dollars, invest a quarter now and invest a quarter if/ when there are further market dips.

Further downside would cause a more proactive buying approach.

Nathan Rothschild said: “The time to buy is when there’s blood in the streets, even if the blood is your own.”

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Mar 07 2025
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Current downturn in the Market

It is Friday afternoon March 7th, and the markets are down for a 3rd week in a row and is now
negative on the year in most asset classes.


There is an enormous amount of uncertainty in the market right now as we all digest the changes
in economic policy coming from the White house. As of this moment, Large Value, International
and Emerging markets are the few sectors that are actually up for the year. The real culprit in this
downturn is not the economy, but valuations. We have talked about this in our commentaries for
the last couple of quarters. Current P/E on the S&P 500 is 21.2 this year’s numbers down from
22.5 times earnings. The ten-year average is 18.1 times earnings which means in the short-term
the S&P is still overvalued. This S&P earnings number includes all the tech and AI companies
trading at 30+ times earnings. If you look at the technology action in the market, those sectors are
being hit the hardest, and coming down to more reasonable levels, but we are not there yet.

Almost all of Wall Street expects at least a 10% downturn in a normal healthy market. One step
back, two step forwards is the best way to understand what is going on. We need a valuation reset
so that we can move higher again. While things may seem scary based on the constant media’s
enlargement of fear about government actions / potential government shutdown, etc…, the truth is
the S&P 500 is down 2% for the year not 20%. A 2% negative number on the market in the short
run is not concerning, especially since most of this downturn comes from the same 7-10 stocks
that put us up here to begin with.

While investors are concerned with market downturns, the ones that are the real culprits are the
monster downturns. Ten percent downturns happen roughly 50% of the time after a big up year,
so it is quite common to have the market make moves like this. We are monitoring every aspect
of the economy and the markets, and this correction has not even hit the 10% correction threshold
yet but most likely will. That is healthy and normal and good for markets.


Have a great weekend and if you have any questions or concerns, please feel free to reach out to
us to discuss in further detail!!!!

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Aug 06 2012
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All quiet on the western front…

The markets have done well climbing the “Wall of Worry”.  Growth managers have outperformed value by a wide margin (risk on trade). The market valuations are still reflecting a slow growth environment as the markets are trading at a 10% discount to the historical averages. If Draghi can get Continental Europe to come together for the betterment of the whole, there could be upside for Europe which would translate to a good market in the US. We will get some more information on productivity and unit labor costs on Wednesday, but nothing that we see moving markets dramatically.  The markets have rewarded risk takers on average for the last 3 and a half years, but this is cyclical, and will change.

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