One of my favorite movies of all time is “Charade” which was released when I was 2 years old, but I first watched it in the 1980s. It has without a doubt one of the finest casts of all-time: Audrey Hepburn, Cary Grant, Walter Matthau, George Kennedy and, James Colburn. The music was produced by Henry Mancini and the film was directed by Stanley Donen. The plot is full of twists and turns of comedy intertwined with romance and suspense. By now, I should have had you hooked to watch it.
However, there is a real-life charade which is now playing out (and has done so every few years). That is the Debt Talks on Capitol Hill. Every participant / party points their collective fingers at each other, but we all know at the end of the day, an agreement will be reached.
Here is what we know so far. The Republican controlled House of Representatives have passed a bill to raise the debt limit while also calling upon federal spending cuts. The Senate controlled by New York Senator Chuck Schumer won’t bring the House bill to the floor. President Biden said that he won’t negotiate and that spending cuts are off the table.
What is really happening is that President Biden and Speaker of the House Kevin McCarthy met once last week and are talking using back channels, including Congressional staffs, while telling everyone the other party is going to force the US Government into default.
It’s just like the movie, one big charade, full of plot twist and turns and you don’t really know who is who. A bunch of political smoke signals are sent up intended on trying to grab the upper hand in the media.
Look, here’s the truth: the debt limit will be raised, some budget cuts will be agreed to, and we will kick the can down the road for a few more months or years.
All the fear mongering is keeping the stock market in check and sending the bond market into apoplectic shock. Don’t position your investments to insulate from a debt default. Position your investment to take advantage of a debt extension agreement and a default is avoided.
Dividend stocks have had a challenging year due to two factors. The first is bank problems. The second is rising interest rates. Just stick to large multi-national banks, such as JP Morgan Chase (JPM) and avoid regional banks. Also, the FOMC has signaled that they are likely to pause rising interest rates. The pause could last for years or may result in a cutting of interest rates even sooner. Both a pause and rate cut will help dividend stocks. Parenthetically, May is a big month for dividends.
On the other hand, after a spectacular first quarter, Growth stocks experienced some backing and filling in April and are rallying again in May.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView Asset Management, LLC was long JPM - although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, (LVAM) an investment advisor representative, specializing in high net worth private wealth management. LVAM is affiliated with Kingswood Wealth Advisors Services, a registered investment advisor. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right-hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
© 2023 LakeView Asset Management, LLC. All rights reserved.