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Registered Investment Adviser Caleb Lawrence 

The major averages plunge for the second time this week as the reality of higher interest rates and a looming trade war bite.

State level Personal Income gained 1.1% in the 4th quarter of 2017. For the year personal income advanced 3.1%. Adjust this figure for inflation and the real gain drops to an anemic 1%. Given the official unemployment data and wages should be growing strongly, the fact that they aren’t indicates either outright corporate greed at the top, or that the economy isn’t anywhere near as robust as the headlines indicate. Neither possibility speaks well for the future.

The recent partial yield curve inversion and dramatic widening in LIBOR or the London Interbank Offered Rate spreads speaks of systemic financial stress. Something measured by the Saint Louis Fed’s Financial Stress Index that after running at a very low level for a number of years has recently spiked to -1.12, still low by historical standards, but the .5-point jump is notable for its suddenness. Some analysts figure this is simply a reflection of the sharply higher Treasury issuance and means nothing. Others fear that it speaks to larger problems, primarily fears relating to the instability represented by excessive and record levels of debt and a looming trade war set to kick off tomorrow. Will find out soon enough.

The Kansas City Fed regional index was unchanged in March, despite a 17-point plunge in new orders to -1. Prices paid remain high.


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