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A 10% Correction . . . So, What?

03/28/2017

Bob Doll of Nuveen is one of my favorite “thought-leaders.”  After a 1.4% fall in the stock market last week, I was looking forward to his thoughts.  Obviously, he thinks the President’s disappointment with the Obamacare replacement makes it more difficult to get badly-needed legislation on the tax code revisions and rebuilding infrastructure.  The much-heralded “Trump Bump” is dependent on the three pillars of healthcare reform, tax reform, and rebuilding infrastructure.  Now, with one pillar missing, the other two look more tenuous.

He would not be surprised by a 10% correction but still feels bullish on the stock market.  Another analyst thinks Trump is given too much credit and surging corporate earnings are given too little credit.  In fact, Trump’s priorities have lifted the stock market only 5.4% since the November election.  The rest is due to the solid earnings growth.  He argues if Trump fails completely, the stock market response will be softened by our earnings growth, and I agree with that.

However, he feels even more bullish about markets outside the U.S., and I also agree with that — but not yet.  I will not be sanguine about the European market until the April 23rd French election is behind us.  If Marine La Pen wins, she will likely end the European Union, at great economic cost.   This would make emerging markets more attractive.

As the U.S. stock market re-calibrates to a less successful Trump agenda, as well as surging corporate earnings in foreign companies as well, it may be time to start looking abroad.

Caveat:  Some investors avoid mutual funds because they suspect the extra fee is not worth the result.   One can argue about that for domestic stock funds, but not for international funds.  You don’t want any U.S. advisor, no matter how smart, buying stocks in Slovenia or Poland for you!  That expertise is not cheap!

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