U.S. politics has been at the forefront of the news recently as parties move through their Primaries and gear up for the fall election.  While ‘mud-slinging’ amid candidates has been the focus thus far we do expect that economic issues will have to come to the forefront at some point.   When they do, one of the key issues of discussion will probably be ‘income inequality’, both how serious it is and how it can be remedied.  The chart below shows how bad the problem is right now.  The richest 20% of the U.S. population control over 88.9% of the total wealth in the country, while the bottom 40% actually have net debt (i.e. net worth below zero)!

Wealth inequality increases in US

Seeing this data, we can understand the frustration in the general population with the government, politicians in general and the financial markets.  This is probably also why some ‘non-career’ politicians are leading in the polls right now.  But we’re also not convinced that a general election that pits a multi-billionaire against someone who has typically received a $250,000 fee for a single speaking engagement is going to make anyone think this problem is going away in a hurry!  The bottom line is that politics in the U.S. is going to just one more of the ‘wild cards’ for financial markets this year.  We plan to invest carefully, looking for opportunities in oversold stocks and areas of growth.  But we also plan to be very active this year, taking profit opportunities as they come and not hesitating to change direction as the economic data, monetary outlook and stock market flows indicate.  For the short term however, it seems like investors may have gotten too caught up with the negative sentiment.  We have been extremely bearish/cautious for most of the past 18 months, but are more sanguine on the outlook right now as we don’t expect the economy to fall into recession and most global stocks have already spent the bulk of the past year going down. 

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