We are optimistic about the long-term prospects of the U.S. economy. The new tax law will add $1.5 Trillion of stimulus. The upcoming Infrastructure bill will probably be passed in 2018 which will add upwards of $1 Trillion in stimulus. The economy should accelerate as a result of the stimulus. An accelerating economy adds to corporate profits and thus to stock prices over the next 5 to 10 years. All this stimulus is not good for bond investors because interest rates will probably rise during the upcoming 5 to 10 years. Higher interest rates means bonds that you already own will go down in value – and long term maturity bond prices decline the most. We have already taken steps in portfolios to reduce maturities to attempt to protect portfolios against the risks of higher interest rates.
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December 27, 2017 | Weekly Commentary