By Steve Watkins – Staff Reporter, Cincinnati Business Courier
The stock market has been relatively stagnant over the past year and it’s probably not looking too promising in the coming months, one Greater Cincinnati investment adviser told me.
“The theory I kind of agree with right now is there’s maybe a holding pattern to not increase (tariffs) again,” Simon said. “Regardless of what happens from there, maybe no deal is ever reached and we stay with these tariffs that are on, the economy will form around that and we’ll be back to business as usual. But right now there’s no business as usual.”
That’s a concern for a stock market that has been in a holding pattern of its own since the beginning of summer. If you go back a year, the S&P 500 has gained just 6%. That’s in spite of a 19% increase year to date.
Simon doesn’t see much to propel the market forward in the coming months.
“If something gets settled (regarding tariffs), which I think is the biggest underlying factor right now, I think we’ll potentially see a 5% bump,” Simon said of a potential stock market increase. “But there are just no other tailwinds right now, so sideways or maybe down. It could be a sell-on-the-news option. There literally is nothing. There’s no new tax plan. An infrastructure plan I could see hurting because what are we going to do another $1 trillion in debt?”
He wrote a story recently about the deficit hawks who used to be adamant the deficit shouldn’t be raised. While it has soared since President Donald Trump took office, those voices haven’t been heard.
The ever-increasing deficit is a concern, Simon said. He’s particularly worried about the percentage of debt that’s tied to entitlements.
“We’ve been at this level before,” Simon said. “It was during World War II. But after the war was over, the levels came way, way down because it was not entitlement-based. It was war effort-based and the country had the ability to reduce the national debt. We don’t have that ability right now. And that is frightening to me. That’s the biggest scare for me right now.”
Simon doesn’t expect a recession to set in although he doesn’t expect a powerful economy.
“There’s nothing pointing to it,” he said of a potential recession. “But that doesn’t really mean it’s a tailwind, either. But the labor market is strong. Even in August, when some data was weak other data was strong.”
He watches the Purchasing Managers’ Index, a measure of manufacturing activity. It has contracted for two straight months. That could be a blip, but if the tariffs aren’t resolved it’s probably more than that, he said. Historically, weakness in PMI has been an indicator of a recession.
“That would cause me concern if we have one or two more months of weakness,” Simon said. “And I think the market will pay attention very quickly.”