July 2019

We just had another amazing month with a return of over 7% for the C Fund and 6.8% for the S Fund. GDP numbers are strong despite "headwinds" in the underlying financials from durable goods orders to weak employment numbers in May. Driving the durable goods orders is Boeing, the US's greatest exporter. Boeing is not the first strategic US company to suffer strategic disruptions to it operations. General Motors and General Electric have also undergone dramatic downturns. While GE's fate is still up in the air (I think it will recover after 3-4 years and a restructuring plan), the US government made sure GM would not fail. Boeing will be in the same boat as GM and while there will be consequences to its failure to properly test and train pilots for the 737MAX, it will not suffer more than it has probably already suffered and therefore its impact on the market and its vast number of suppliers has already been factored into the market. Next issue to address is the trade war between the US and China. As I have mentioned in the past, the US has the upper hand in this fight. With a healthy GDP, room in the federal interest rate, and a more legitimate and transparent economy, the Chinese are going to eventually run out of fuel and capitulate to US demands. While the tariffs and counter-tariffs are unfortunate and it would have been nice to have resolved the war early, we are entering a new phase where China will begin to feel the real strain on both the reduced demand for its good as a result of US tariffs and its realization that it cannot survive without US food imports. Additionally, the US can lower its interest rates and maintain its growth organically, the worst possible scenario for Chinese exporters. I think the market is still going to remain strong for the year. Perhaps there will be a slight dip in the coming months as people lock in profits, but I am remaining in the C Fund at 100%. Keep investing!