"Are you willing to buck the bad news?" by: John Sample

   Last week’s holiday-shortened, four-day trading week pushed the equities markets further north. There was potential for January to be the best trading month in the last 12 months until Monday’s earnings report sent the Dow down 200 points. 
   Caterpillar and Nvidia earnings reports showing concerns over future earnings in 2019 sent the Dow down early over 500 points. Cooler heads prevailed toward the end of the trading day. 
   This is just the beginning of earnings reports, as 13 of the 30 Dow stocks will report this week. For all those assuming that tariffs would be terrible for the U.S. economy and companies’ earnings in general have had to think twice. 
   Nucor, for example, is succeeding now that the playing field for steel has been leveled. 
   It appears that the Chinese will come to the table on not only tariffs, but also intellectual theft. 
   The Chinese economy is nowhere near recession, but their level of growth has dropped further than the U.S. and their debt limits the government’s ability to support. Now that the Chinese appear to want to talk, it is my hope that the discussions address all the problems.
   One company that has been impacted by the slowing growth in China is Caterpillar. 
   I would suggest this too will pass and those with a long-term perspective can use these pullbacks to find value. 
   Another thought is to focus on companies that derive most, if not all, their earnings in North America. 
   There are numerous companies, such as Verizon and 3M, generating the vast majority of their earnings in North America. 
   I wish they were more of a value but only a recession will do that and I don’t wish bad times to feather my own nest. 
   Thankfully we have thousands of stocks to evaluate and find hidden gems.
   The one good news I will predict this week is that the Federal Reserve will not increase rates and will say little or nothing to disturb the markets. 
   It should be noted though that the Fed’s attempt to lower the amount of debt that it purchased will tighten credit markets anyway. 
   Even without a rate increase, the U.S. treasury rate is significantly higher than foreign interest rates. There is no way to get past the fact that 2019 will not be a walk in the park picking winners. 
   The economy will slow compared to 2018, but there will be growth in the 2.5 percent range. 
   That is the good news but the bad is that we have been recovering from 2008 for over 10 years. 
   Bottom line this year is it will take real thought and effort to find winners.   

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