US economic fundamentals are good. Don’t overreact to trade issues Markets are using trade disputes as betting events. Trade issues will linger on because they have not been addressed, and solved, at the highest political levels. Accelerating inflation is the only threat to U.S. economy.

Wall Street is regrouping. Easy money has been made. The fiscal stimulus has been priced in for a long time. The Fed is an ongoing game, but the slightly easing price pressures along the U.S. yield curve are signaling surprisingly stable inflation expectations.

The current mix of easy fiscal and monetary policies has produced an improving outlook for jobs and incomes: the two variables that, along with credit costs, drive three-quarters of the U.S. economy.

Despite some areas of persisting weakness, the labor market situation is probably as good as it will ever get over the near term. At this point in the business cycle, we are witnessing a fully-employed economy hitting the limits of a disappointingly low labor supply.

The growth of household incomes is also picking up. A 2 percent annual growth of inflation-adjusted after-tax incomes in the first four months of this year is a noteworthy improvement over a 1.7 percent gain during the prior four-month period.

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Despite a generally positive economic outlook, one asset manager warns that signs of a potential market crash are now appearing

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Regardless of whether it happens sooner rather than later, any time the market drops, Oracle of Omaha Warren Buffett recommends keeping a level head and picking up a copy of “The Intelligent Investor.”

“Any time the market takes a sharp dive and you get tempted to sell or something, just pull out this book and re-read it,” he says in a video posted on Gates Notes, adding, “When I read this book, it changed my life.

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The S&P 500 held its support and is now rebounding, a bullish sign

 

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In last Monday’s article, I expected to see downside during this past week.

But the S&P 500 Index was unable to break below the important 2,700 region of support we said was the key to a larger pullback. When a bull market is able to hold support, it usually turns back up. So far, the bears have not shown an ability for any downside follow-through.

The easy part in the market was completed by the rally through the 2,727 region for the S&P 500 SPX, +1.18% Since then, we have seen much of the whipsaw action that accompanies corrective structures, and that is what we expected this past week.

Yet, with the market’s refusal to break below 2,700, we are now going to have to question whether all of wave (4) has indeed been completed, and if we have begun the next rally to 3,000-plus. Again, I find it hard to believe that a year-and-a-half-long wave (3) will be corrected by a two-week wave (4). So my primary expectation is that we will retest the lows we struck earlier in February, and may even break those lows before we rally to 3,000-plus.

But I will not be maintaining a bigger bearish bias if the market indicates it would not be appropriate. As I outlined during the past week, if the market would be unable to break below 2,700, it would open the door to rally back up toward 2,800. And if we are unable to see a sustained and impulsive break of the 2,730 region early in the coming week, then it would seem the market is heading up toward the 2,770-2,800 region.

So let’s review where we stand, based on the step-by-step guidance I sent out last week. If the market is unable to break below 2,730 early this week, then it keeps pressure up toward the 2,770-2,800 region to complete the larger degree b-wave, which has been the larger-degree target for this b-wave since we began this rally from below 2,600. The only question is whether we see the more indirect path to the b-wave target with a break down below 2,730, which is represented by the yellow count, or if we will be heading up toward 2,800.

If we do see a more direct path this coming week toward our target near 2,800, then it will clearly make me question whether wave (4) has actually been completed at our minimum target for wave (4) between 2,424-2,539 (as the low struck was 2,536). You see, a direct move to the 2,800 region can be wave 1 of wave (5) pointing to 3,000-plus. And the only way we will be able to distinguish between a c-wave back down to the 2,539 region, as compared to a corrective wave 2 (in blue), will be the manner in which we decline from the 2,800 region. But the decline off the 2,800 region will likely be a big buying opportunity.

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Activist investor RBR Capital Advisors wants to expand its stake in Credit Suisse to 1 billion Swiss francs

Activist investor RBR Capital Advisors wants to expand its stake in credit Suisse to 1 billion Swiss francs ($1 billion), as the hedge fund pushes to spin off the Swiss lender’s investment bank and asset management business.

RBR has so far invested almost half its 250 million francs in assets to buy roughly 0.2 percent of Credit Suisse, which it believes would be worth twice as much if the bank focused solely on wealth management and its Swiss business.

RBR Chief Executive Rudolf Bohli is trying to drum up fresh cash to take a larger position in Credit Suisse, switzerland second-biggest bank.

“Currently the RBR fund has invested 100 million,” Bohli told Reuters in a telephone interview. “We aim to raise an additional 900 (million).”

The boutique Swiss hedge fund went public this week with its campaign to split up Credit Suisse into three parts: an investment bank, an asset management group and a wealth manager accommodating its Swiss retail and corporate banking operations.

Success hinges on winning support from other investors, with Bohli saying his firm has signed non-disclosure agreements with 150 investors, mainly non-Credit Suisse shareholders.

RBR, which has had mixed success in previous activist campaigns against asset manager Gam and airline catering company Gategroup has not set a timeframe for its campaign.

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The Advantages of Fund Investing

At a basic level, investing in a fund means having a fund manager make investment decisions on behalf of the investor. Rather than following the markets and picking shares or bonds the investor decides on the size of an investment s/he wants to make and hands the money to the fund manager.

The investor receives regular reports on the fund’s performance but has no influence on the investment choices short of removing his/her money from the fund and placing it elsewhere.

Buying into a fund does incur charges so an investor must weigh the advantages  .

 Risk Management by Fund Manager 

Many of the benefits of fund investment hinge on the importance of diversifying investments to reduce risk. Diversification can be achieved in a number of ways. Investors can spread risk across asset classes (such as bonds, cash, property and shares),countries  and stock (such as financials, industrials or retailers).

As a general rule, holding one investment is riskier than holding two, three is safer than two, four better than three and so on. This is because all investments do not react in the same way to the same economic conditions.

For example, when shares may be suffering as a result of poor economic conditions bonds may be doing well. When Asian markets are falling, American markets may be rising, and when the service sector is providing strong returns manufacturing may be weakening. This is not to say that these comparisons reflect the nature of the market but to point out that all investments are not the same.

The risk to the investor is reduced because a diversified portfolio means that if some assets do poorly the performance of others may balance them out.

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