2 February 2018: Can Jerome Powell do it right?

Next Monday, Jerome Powell will be appointed as the new Chair of the Board of Governors of the Federal Reserve System. For most people, both investors and ‘ordinary’ citizens, the economic circumstances appear to be very positive at the moment. The American economy is booming, unemployment rates are declining and stock prices are at a (very) high level. Poor Jerome, to start his career as the boss of the Fed at this peak moment. It will be very difficult for him to do it right under these circumstances. There is only little room left to add to the euphoria and so many ways things can go wrong. It is unclear if US President Donald Trump’s policies will be effective in the long run, stock market investors are getting more and more anxious because of the high valuation of stock prices and the American economy could go wrong because of various reasons (overheating, protectionism, recession, geopolitical uncertainties, etc.). One thing seems to be certain: if things go wrong, it is not the man in the White House who will consider himself to be the one to blame. Hopefully for Jerome Powell, testing for an elephant skin was part of the assessment of his new job…

white-chapel-logo-smallUS stock indices ended mixed on Thursday. They switched between gains and losses throughout the trading session as fears of a pick up in inflation and rising bond yields weighed. The Dow was the only winner of the major indices and made a gain of 0.14%. Both the NASDAQ (-0.35%) and the S&P 500 (-0.06%) recorded a loss. Volatility eased somewhat from relatively high levels: the VIX closed 0.5% lower. UVXY ETFs paid a higher price and lost more than 6%. XIV ETNs gained 3%.
All of our models recorded a nice gain as they are all holding XIV ETNs. Danny Daredevil saw his RSS rise to 16%.
Adventurous Anny‘s RSS reached 24%. The RSS of Solid Suzy and Lazy Larry climbed to 94%.
None of our models gave a trading signal at the end of yesterday’s session.

Model Holds Start date

RSS

YTD

QTD

AAR

Danny Daredevil XIV 1 January 2016

15.93%

13.67%

13.67%

7%

Adventurous Anny XIV 6 March 2017

23.71%

0.65%

0.65%

26%

Solid Suzy XIV 6 March 2017

93.99%

-3.79%

-3.79%

107%

Lazy Larry
XIV 6 March 2017

93.99%

-3.79%

-3.79%

107%

RSS = Return Since Start | YTD = Year-To-Date | QTD = Quarter-To-Date | AAR = Average Annual Return

 

RS_v05-smallRené’s Reflections @ Friday: The Next 100 Years

Currently reading: The Next 100 Years: A Forecast for the 21st Century by George Friedman, founder of STRATFOR. I bought an early (2009) print at the second-hand bookstore I visited earlier this week. In this thought-provoking book, “Friedman predicts overall historical trends for the 21st century, such as that the United States will remain the dominant global superpower throughout the 21st century, and that the history of the 21st century will consist mainly of attempts by other world powers to challenge American dominance. Although mainly about the geopolitics of the century, the book also makes some economic, social, and technological predictions for the 21st century.” (Wikipedia)
Friedman describes past, present and future in chunks of two decades each: 1900-1920, 1920-1940, 1940-1960, and so on. At the time of this writing, we have almost reached the end of the first ‘chunk’ that extends into what was partly ‘unknown territory’ when Friedman wrote the book: the period 2000-2020. And soon we will live to see how the next period of 20 years will look like, and be able to compare reality with what Friedman believed it would be, back in 2009. Reading past predictions about the present is usually amusing at best, at worst embarrassing. But this book is none of both. For me, it is an eye-opener in other ways than I expected. I’m gonna have to let it sink in, and I will probably share some insights it gave me in a future post. In the meantime, I wish you a nice weekend, with or without a book. See you on Monday!