Happy Birthday, America! Asset Allocation Daily

by: SA For FAs
Summary

ING Economic and Financial Analysis upbeat on Mexico because of its newly elected leader’s post-election pragmatic rhetoric.

James Picerno: U.S. REITs continued to lead the asset-class pack in June, while emerging markets continue their submerging.

Thought for the Day: How American independence was won, maintained and what is its status today.

Mexico

"Despite yesterday's relatively choppy market reaction, we remain constructive about the outlook for Mexican assets... We suspect foreign investors remain particularly inclined to add to their positions. This reflects a conviction that local assets remain attractive under the assumption AMLO will insist on a more pragmatic and conciliatory rhetoric post-election." (ING Economic and Financial Analysis)

Asset Class Performance

U.S. REITs made very solid gains in June (4.4%), leading the pack of asset classes, while emerging markets' stocks were the month's biggest laggard (-4.2%). (James Picerno)

Portfolio Management

Investors should understand the differences between a benchmark index and an individual portfolio: Benchmarks have no life expectancy requirements - but you do; they don't have to compensate for distributions for living expenses - but you do; they have no taxes or expenses - but you do. (Lance Roberts)

In The News: Lots Of Uncertainty

Presidential threats to back out of the World Trade Organization and worries about China and the EU countering U.S. tariffs with increased duties of their own weigh on markets. Oil supply disruptions and possible Saudi production hikes add uncertainty to the direction of oil prices. Edmunds sees strong support for U.S. auto sales from a strong economy, but factors poised to slow down auto sales in the offing. (Wall Street Breakfast)

Thought For The Day

As America prepares to celebrate its 242nd year of independence, it bears reflecting a bit on how America achieved its independence, how the U.S. has maintained its independence and even just how independent the U.S. really is.

America fought for its independence against Imperial Britain, the world's then dominant power. Perhaps the most vital key to American success was hinted at in Benjamin Franklin's famous warning, upon signing the Declaration of Independence - an act of treason from the British perspective - that "we must, indeed, all hang together, or most assuredly we shall all hang separately." He understood that unity was a precondition to achieving independence.

How has America maintained its independence? Despite acute differences between and among the states and the federal government, the states themselves, between the political parties and among competing social groups and business interests, America has moved forward via an underlying broad agreement and reference to the virtues of individual liberty, private property, and capitalist enterprise. There were times when the consensus broke down, as in the Civil War, but the strength of these underlying values were key in enabling the U.S. to recover from that calamity and advance to even greater strength.

Finally, how independent is America? The U.S. succeeded in gaining "independence" from Britain formally via the Treaty of Paris of 1783, but trade between the two countries resumed immediately, albeit with an enormous trade imbalance in Britain's favor. The so-called "special relationship" between the two countries was already well underway, on a de facto basis, before the 18th Century ended, and the U.S. gained heavily through the protection of the British Fleet, just as so much of the world can thank the U.S. military for its security today.

In short, the U.S. was never fully independent because no country is or ever has been not dependent on other countries. The U.S. has been sovereign for nearly a quarter of a millennium but it does nothing without taking other countries into account.

In short, the U.S. achieved its lofty status through unity, shared principles and cooperation with its former No. 1 enemy as well as others. While the U.S. remains the world's most powerful country, it has weakened in each of these three areas. By the way, I could have written this same mini-essay word-for-word under previous administrations - so let's please desist with needless vituperation against the "other side," whoever that might be.

To the contrary, the Fourth of July is a time to remember that "we… all hang together or… we all hang separately"; that the blessings of liberty are the basis of prosperity for the American people and their posterity; and that America has extended liberty and prosperity to much of the entire world through an unprecedented degree of international cooperation. Happy Birthday America!

Asset Allocation Daily will resume publication on Thursday, July 5.

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