Stop and Savor

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Over the Labor Day weekend, my wife and I joined two dear friends and hiked the Appalachian Trail, trekking forty miles through the picturesque Shenandoah National Forest in Virginia. Our adventure began in a torrential down pour at Swift Run Gap and ended four days later on a beautiful sunny afternoon at our final destination, Thornton Gap. In between there were exhausting uphill climbs and bone-jarring downhill stretches, all on very uneven, rocky terrain, forcing us to concentrate on every step. But thankfully, every so often, we stumbled on magnificent views of the mountain peaks and the valleys sprawled out below. To enjoy the moment and really soak in the amazing beauty all around us, we had to stop, and when you are hiking ten miles a day, you sometimes prefer to just keep going, to maintain the rhythm of the hike. In essence, each long, arduous day was a battle between dogged pursuit of the day’s destination and stopping occasionally to savor the moment.

The rhythm of the markets…

Just like a hiker in rhythm who prefers to keep going, the markets crave directional momentum as well. Unfortunately, the uneven terrain of today’s economy is making this search for rhythm nearly impossible. Will the Fed raise rates or won’t it? Will oil prices recover or head lower still? Is the economy accelerating or decelerating? And perhaps the most pressing question of all – Who will win the presidential election next November? The list of important, yet unanswered questions, is not a short one.

Not surprisingly, the stock market has been on an incredibly volatile ride over the past couple of months, reflecting heightened economic and political uncertainty. In my view, this volatile, uncertain environment won’t end until the presidential election next November.

What is there to stop and savor?…

Pausing, amidst any difficult journey, can lead to a new perspective, and just the potential for a new perspective, is a hopeful thought. So, let’s pause and savor, for a moment, the potential…

The United States, despite all its current challenges and failings, remains a country of immense potential. From our abundant natural resources to our world-leading universities to our entrepreneurial spirit, America remains the greatest country on the planet. Our democracy, capitalist system, rule of law, commitment to uphold individual rights, while all under some level of stress, remain huge competitive strengths compared to an increasingly tumultuous global environment.

Over the next 14 months we will be bombarded with a wide range of political views, but the entire political debate, if I can be so bold, boils down to one critical issue, which is finding the optimal balance between the public and private sector. There are certainly merits to both sides of this debate. More importantly, however, there are costs for every imbalance, some more significant than others, so getting it “right” really matters. While both sides seem quick to define what is the right balance between government control and private enterprise, neither side focuses enough on the inherent trade-offs, or costs involved in skewing this elusive balance in one direction or the other. A good example of this is the current debate about drug prices. Some contend we need government price controls, while others warn that price controls will stifle innovation. There are benefits and costs to both viewpoints. Until we include both in the conversation we won’t figure out the optimal balance. How could we possibly solve this dilemma if we don’t address all the benefits and costs in open discussion?

Is this comprehensive debate too complicated for any single candidate to grasp or better yet explain? From the current flow of political rhetoric, it would appear so.

Which brings me to The Donald…

I’m not a fan of Donald Trump, nor do I think he would make a good president. But I could be entirely wrong. He is the biggest unknown in a difficult to predict election. With just about every other candidate on either side, we know what we’ll get. But not with Trump. Yet, he is still leading in most of the polls on the Republican side. Why? For one simple reason, our country has lost confidence in Washington. We are, to a large extent, fed up with the status quo. I am all for electing an outsider, as long as that individual can lead us toward the right balance between government involvement and the private sector. That is the critical goal. A goal that will largely define the future of our country and the opportunities available for our grandchildren.

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