US presidential election will benefit our stocks.

18  May 2019

Dear Fellow Investor,

Next year 2020 will be the US presidential election and it will be important for Trump to deliver a prosperous economy to increase the odds of his victory and thus benefit our stocks.

For now the US economy is doing well with record low unemployment, relatively low interest rates and  well performing US stock markets.

What could upset the apple cart is the escalation of  trade conflicts between  China. and the US.  

Even Warren Buffet in his recent AGM warned that trade wars hurt all parties. I do not think Trump will ignore Warren Buffet’s advice.

Last night Canada reached an agreement with Trump to end steel, aluminium and agricultural tariffs. Trump also extended a 6 month moratorium on auto tariffs with the EU. These are good signs and might motivate China and the US to find common ground.

Because of the current solid economic performance Fed Chair Jerome Powell is reluctant to lower interest rates but there is a seasonal pattern in play.

In the 3^rd year of a presidential cycle, many former US presidents pressured the federal reserve to cut interest rates. Jerome Powell looks like a man who knows how to cooperate.

An interest rate cut will support world markets and increase the odds of Trump winning a second term.

On the home front, there are some positive signs. Economic growth figures released by Bank Negara beat economists estimates and came in at 4.5 % Also the establishment of a Debt Management Office (DMO)  led by the finance minister will look for savings on debt restructuring.  The 1600 level on  the KLSE is well supported.

On 13 June I will be attending the AGM of Kellington Group, who manufacture industrial gases.  They have performed well and should continue to do so in spite of trade jitters.   

Many quality KLSE and SGX companies  were trading when we bought at less than intrinsic value which does give us a margin of safety.

If the cycle turns we will do well and if it doesn’t our risk is low and we still collect our dividends.

Invest well and grow your wealth
Bill

Critter of the week is the newly born giraffe at Zoo Negara. We hope to visit him Monday.These are amazing animals.