Watching for Black Ice

Knowing that much of the Eastern part of the United States will be dealing with snowy, icy conditions all day today I thought it would be appropriate to bring out the black ice metaphor to discuss many possible issues that could quickly erase the fast positive performance we have enjoyed in the early days of 2018. I am not trying to be Debbie Downer but I do observe that consensus has definitely switched to a more positive beat than before the passage of the new tax bill. This sentiment shift is noticeable and should be considered when making new investments.

Today as we come back from the MLK holiday futures are looking positive again as we start a new week loaded with a lot of earnings announcements and not much concern about trouble spots. Overall, I believe the earnings reports will be positive as corporate executives direct most of their full year forecast toward the positive impact from the new tax legislation. Companies that garner most of their earnings from the U.S. will benefit most from the new tax bill but even major international focused companies will be talking about the benefits of bringing back dollars to the U.S from their foreign operations. Therefore, there is solid reasons to remain constructive on U.S. stocks when weighed against other investment options.

Maybe I am showing my age a little bit but this black ice metaphor kept coming back to my mind as I was considering various topics for today’s commentary. When markets move higher on a daily basis my mind starts to look for things that could upset the positive trend and potentially change the investor’s perspective. It could be the credit markets but despite a lot of calls from fixed income analysts for much higher interest rates we don’t seem to see that being priced into various bond markets today. It could be China and the potentially damaging trade war implications if our administration decides to push hard against Chinese trade. Again, today that concern seems to be somewhat contained as the Chinese are the single largest holder of U.S. government bonds. Finally, it could be the threat of North Korea or Iran but we have been living with this threat successfully as stock markets continue their positive direction since early last year.

Black ice on the other hand is invisible and doesn’t really scare you until you are spinning out of control with no traction or ability to stop your car. Once you start spinning you suddenly realize you were driving a little too fast on that bridge or hill and the end result has been taken out of your hands. So, call me the old investment manager that I am but I will start to treat this market more suspect if black ice conditions continue to develop. Another way to express this is that I don’t believe conditions warrant pushing the pedal to the metal with new investment dollars and may warrant trimming some of our best roses for future opportunities.

Have a great week and heed the words of Sergeant Phil Esterhaus from Hill Street Blues: Hey, let’s be careful out there.

Roger N. Steed

January 16, 2018

KRS Capital Management, LLC (“KRS Capital Management”) is a state registered investment adviser with its principal place of business in the state of Michigan. KRS Capital Management and its representatives are in compliance with current registration requirements. KRS Capital Management may only transact business in those states in which it is registered or qualified for an exemption or exclusion from registration.

KRS Capital Management's newsletter services are limited to the dissemination of general information that is financial and/or investment related to United States residents residing in states where providing such information is not prohibited by applicable law. Accordingly, the content in this newsletter should not be construed by any consumer and/or prospective client as KRS Capital Management's solicitation to effect or attempt to effect transactions in securities or the rendering of personalized investment advice for compensation via this medium. Furthermore, the information resulting from the use of data or other information in this newsletter should not be construed, in any manner whatsoever, as the receipt of, or a substitute for, personalized individual advice from KRS Capital Management.

A copy of KRS Capital Management's current written disclosure statement discussing KRS Capital Management's business operations, services, and fees is available from KRS Capital Management upon written request. KRS Capital Management does not make any representations as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party incorporated herein and takes no responsibility therefore. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly