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The Bull Update For Clients and Friends of ArrowMark Partners and the President of the United States of America

The Quarterly Update series was created to demystify Economics and Investing: First published on March 30, 2017 and last updated: August 25, 2018

Record Bull Market

All-Time High* and Duration*

Ladies and Gentlemen, the Standard & Poor’s 500 Index

Editor’s note: This record has been asterisked for performance enhancement.

Feeling Fahrvergnügen?

Animal Spirits

— Fiesty For A Fight —

The venerable Dow Jones Industrials Average, the Preferred Benchmark of the President, has tripled off The Bottom

*Enhancement* Helped

Forty Years of Easy Money

Giving Credit where Credit is due: The Great Paul Volker, after fighting and beating Inflation, set in motion a generational tailwind for asset prices.

The Fed Balance Sheet

Stimulation For Asset Prices

(Is Soon Ending)

Quantitative Easing (QE) is represented by the little green pills in these graphics. From 2009 to 2014, the Fed “printed money,” $3.5 trillion in three dosages, to lower interest rates to zero percent.

The Consumer Economy

Strong Economy is Driving Consumer Confidence

Confidence is up 100 points off the Record Low of the Great Recession. Should we be concerned that Consumer Confidence is failing to break above the Internet Bubble highs of 1999-2000?

Much Fewer Unemployed

Peak Unemployment and Hopelessness

From the Peak, the number of total unemployed has fallen by nearly 9 million.

Record Job Openings

Being Able to Change Jobs -or- Find a Better Job is Huge

Jobs Matter. Jobs provide income, purpose, hope and community.

Jobs Looking For People!

There has never been a better time to find a job

This a rare moment where the number of job openings exceeds the total number of unemployed Americans

Incomes Rising

Do Americans Vote with their Pocketbooks?

The Red Arc above shows that Personal Income growth in the United States has been fading for 20 years. So far, under the Trump Administration, personal income growth has started to pick up, last reading +4.9% in June 2018.

Confidence is Fragile

Cracks are Forming

The Consumer Confidence Index is made up of two parts, the Present Situation and Future Exoectations.

Present Situation

It’s Good Now

Favorable job market is pushing the assessment of the Present Situation close to the All-Time High of the Internet and Y2K Tech Boom.

Labor on the Sidelines

5 to 6 million Americans who could work if the job was right

Stormy Outlook

The Future Is Uncertain for the Bulwark Consumer

Hope Collapsed during Financial Crisis. It’s since improved but Future Expectations is Fading

Consumer Sentiment

Holding the Line, but Fading since the Trump Bump

The University of Michigan survey asks respondents to assess current business conditions, appraise their own income prospects, and signal future buying intentions.

We Are Saving More

Post Crisis: Six Percent is the New Three Percent

Savings Is Consumption Later but Reduces Economy Now

Maybe if we called it “Deferred Consumption,” this Economic data residual would get some more Respect!

Spending Drives Economy

In the U.S., Consumption Is Two-Thirds of GDP

So far, the American Consumer is Steadily Driving Economic Growth despite the increased allocation of income to savings.

Economic Model

(a) Retail Sales and (b) Real GDP

Growing Consumer Confidence is driving strength in Retail Sales, up 7.0% in Q2 2018.

Retail Sales with 2-quarter lag for Real GDP Growth

I forecast 4% Real GDP growth through 2019

Sales at the Cash Register today cause Inventory Reorders at the Factory and sustains the Business Cycle

Trade War

America First!

Why Fight A Trade War and Why Now? Our Economy is Outperforming.

For generations, America has served the world as her benign Super Power as its Inspirational Leader and Financier, and Policeman. Americans shared their prosperity around the world to avoid, to tie nations and cultures to together and never again fight a global war of total proportions.

More Trade War

America’s Heartland Has Spoken

US: Challenge China, & Make America Great Again

China is willing to deal but must also show Xi is no pushover. China Remembers the Opium Wars.

The Situation

The U.S. Economy is Breaking Out and Away from the Rest of the World, and the Fed is Normalizing Monetary Policy

Dollar is Strengthening

Financial Market Volatility is Rising

Emerging Markets are Plummeting

Pax Americana to America First

During QE, the Fed injected $5 Billion Per Day into the markets. In Normalization, the Fed will remove $2 Billion Per Day.

The US Consumer Economy

It’s a delicate balance. Optimism is everything.

Mr. President

Without a Trade Deal

It can’t be US against the world forever.

With a Trade Deal

A successful trade deal with Mexico builds a strong foundation for a new NAFTA with Canada, and likely sweetheart deals for The United Kingdom and Australia, extending the North American trading bloc to English speaking countries.

NAFTA + UK and Australia likely leads to a deal with Europe. Korea and Japan will stand by America, completing encirclement of China

Since the opening salvo of the Trade War on January 24, 2028, the Chinese stock market is down 20%. The Dow Jones has barely taken a hit.

Hecho en Mexico

A Deal with Mexico is the Foundation for Sustaining Economic Growth.

A deal with Mexico is the Foundation for sustaining Economic Growth.

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