Good morning.

Stocks are little changed to start the morning … which, following yesterday’s plummeting, feels like a bit of a victory. But there still seems to be a lot of concern out there among investors that recession is in the cards.

For those unaware, I am going to cheat a little here and give the wording from Yahoo Finance on what a recession happens to be. “A recession is an economic downturn that can have a significant negative impact on an economy and the corporations and individuals within it.  Recessions are normal in the life cycle of an economy and can be a result of several different causes.”

There are a couple of problems we face if tempted to run away from the markets based on the increasing amount of recent comments of a downturn.  First, we don’t know if a recession is actually on its way (or already here) … and even if it is … timing just when best to invest (or disinvest) … is all but impossible.

Meanwhile, we know that investing has paid off over the long term, so I must ask. Do you know how many “recessions” we had over the last 125 years?  23 … according to National Bureau of Economic Research … showing these are not as rare (or crippling) as you might think.

Just two other points today.

The trade war with Canada seems to be continuing … and worsening … as they placed a 25% tariff on electricity coming into the U.S.  In response, President Trump just announced a retaliatory increase in the tariff on steel and aluminum to 50%.  I fully suspect Canada will now increase their tariff … or even stop shipping electricity into the U.S. … creating quite a problem … and then we will respond … and then they will … and we will.  A never-ending game of Whack-a-Mole in which there are no winners.

Not spoken much among all the crazy news stories of late are Schwab and Bloomberg reporting that international stocks are seeing the best start to a year in a quarter of a century.  When things are going well it is easy to focus on the winners (be it country, company or even industry) … but diversification is important to a portfolio to lower its overall risk.  Always has been … always will be.

That about wraps it up for today as I head out to the supermarket.

I am actually on two separate diets at the moment

… as there isn’t enough food on just one to get me through the day

Have a great day,

Joseph G. Witthohn, CFA

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