Thanksgiving with friends

For the past several years I've put together pre-Thanksgiving “cheat sheets” to prepare myself for the sorts of questions that family members typically throw my way over dinner. I’ve done this because the topics that dominated our small talk at family gatherings in the past (politics, sports, weather) have become either too polarizing or too depressing for most of us to stomach over a large holiday dinner. Meanwhile, the accomplishments of our children have already been so thoroughly blasted out through a multitude of social media channels (accompanied, of course, by the appropriate emojis and a trove of photos) that there isn’t much fresh ground to cover there either.

Two years ago we hosted extended family at our newly built home (so plenty to talk about there) and last year we found ourselves with just the immediate family in a pub in Ireland (I find that Guinness tends to help the flow of any conversation). But this year we are iterating our Thanksgiving holiday once again. We will be joined by some very dear friends as well as my youngest daughter’s new boyfriend and his parents. With such varied backgrounds at the gathering (marketing professional, police detective, mechanical engineer, district attorney, sports marketer and ICU nurse) the conversation is sure to be lively and varied. So to make sure I can hold my ground when the conversation inevitably steers towards “the market” I’ve prepared the following key discussion points. Hopefully you will also be able to turn to these if a lull develops in your own holiday conversations and you find yourself put on the spot.

Will the President get impeached, and how will markets react?

The head of our US Office of Public Policy (John Savercool) believes that impeachment is a virtual certainty. It’s doubtful that Speaker Nancy Pelosi would have allowed investigations and hearings to progress this far unless she was confident that a Democrat majority House would deliver articles of impeachment. However, unless something new and far more damaging than what has already been presented emerges from these hearings, it’s unlikely that enough Republicans in the Senate would break ranks to muster the 2/3 majority necessary to remove a President from office - especially a Republican President with a 94% approval rating in his own party. And history suggests that if we get impeachment without removal from office, then markets are likely to look past the political discord and instead take their cues from the economic environment and corporate earnings outlook.

Will the US and China reach a trade deal?

It’s pretty clear that the sort of “grand bargain” that some had hoped for to end the trade dispute between the US and China is simply out of reach - and that’s probably a good thing. Because trying to address the myriad issues related to the complex and contentious US-China relationship would take years and perhaps never reach a definitive conclusion. Instead, by breaking the trade negotiations into more manageable steps or “phases” there is a better chance to develop a framework for a gradual “de-escalation.” The first stage in that process is being hammered out now with both sides still tacking for advantage while simultaneously trying to prevent any backsliding by the other side. With much at stake (both sides have felt the economic fallout) and a more modest scope (the easiest to agree upon items are teed up first) the odds of reaching a phase 1 agreement prior to year-end are fairly high.

Does it make sense to invest now with markets having made new all-time highs?

In my conversations with clients, friends and family members, this has now become the most frequent (not to mention the most difficult) question to answer. The level of apprehension on the part of investors is understandable. We are, after all, in the 11th year of the current bull market, confronted with a series of both political and geopolitical headwinds and challenged by a marked deceleration in global growth. With earnings growth having stalled (at least for the time being) and valuations near post-cycle highs, a pullback in risk assets is likely at some point over the next 6-12 months. But to suggest that investors should avoid markets - or try to time entry points to coincide with market corrections - would be imprudent. It remains our view that while our positioning must evolve, and return expectations need to be managed down, the bull market will prove durable. So maintaining a well diversified and balanced portfolio that stresses a consumer focus, domestically oriented sectors and quality companies with a commitment toward dividend growth is the most sensible approach.

Who will win the 2020 Presidential election and how should I position for the outcome?

If the current state of the bull market is the most difficult question to answer, then the current state of domestic politics is certainly the most contentious issue to even try to address. This is shaping up as perhaps the most polarizing election in memory as both parties chart out starkly different policy paths. So this not only represents an important decision for the citizens of this republic, but also a critical outcome for investors. So how should we position? Keep in mind that it is far too early to begin handicapping the outcome of the election - let alone re-position portfolios based solely on political rhetoric. Much of what is said during the campaign fails to make it into a policy agenda or survive the legislative gauntlet unless one party is able to control both the executive and legislative branches and command a super-majority in the Senate. That said, care should be taken to insure that portfolios are not overly exposed to sectors likely too fall into the political cross hairs. These include energy, healthcare, financial services and technology.

What are you most thankful for?

I'm thankful for a patient and loving wife, for a daughter and freshly-minted son-in-law who actually enjoy spending time with us, and for a younger daughter who has once again found love and happiness after having faced a life-altering tragedy. I'm thankful for dear friends – both old and new – who enrich my life simply with their presence. I'm thankful for the privilege of working with some of the most dedicated, intelligent and honorable people I have ever met. Lastly, I'm thankful to live in a country founded upon a set of noble principles and driven by a collection of aspirational ideals. We may not always get things right…but we never seem to stop trying.

Who do I intend to vote for in 2020?

This is about the time I turn the conversation back to the accomplishments of my kids, the excellence of my wife’s cooking skills, the likelihood of a brutally cold winter... and, of course, the prospects for the Mets making it all the way to the World Series.

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