December 13, 2019

Our analysis points to a continued gridlock. An economic expansion on the order of 2% leading up to the summer. An inflation rate in the 1.75% and perhaps a Stage I trade deal with China. All of this when incorporated into our valuation model suggest a flat to low-single digit equity appreciation during the first half of the year. Also as the election approaches, if the likelihood of one of the parties sweeping the election increases ,the economy and the stock market will reflect the changing likelihood. The prospect of significant tax rate increases will lead to what we have called a false prosperity. An acceleration of economic activity in order to avoid future taxes and a declining stock market. In contrast the prospect of lower future taxes will lead to a rising stock market and an economic slowdown as people delay their income recognition in order to take advantage of the lower future taxes.

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