There are horrible people who, instead of solving a problem, tangle it up and make it harder to solve for anyone who wants to deal with it. Whoever does not know how to hit the nail on the head should be asked not to hit it at all. - Friedrich Nietzsche

In nearly any competitive endeavor, there are plenty of obstacles to make the task difficult. First and foremost, there is the opposition. In sports, the immediate goal is to win the game you are playing. In politics, it is to be the candidate that your party chooses, and then the general public wants. In business, it is to attract customers to your offering. These may seem simple, but success or failure is often determined by the relative attractiveness of what your entity offers compared to the other alternative. In conjunction with this simple reality, the psychological approach of those in the battle is a crucial variable. Today, as has been the case historically, you often learn about those who make the challenge much more formidable than it really is. When I was growing up, the local university, the University of Nevada Las Vegas, had a famous coach. He typically would describe upcoming opponents, no matter how good or bad, as tremendously formidable, as a way to motivate his players. As a youth, I thought his psychological strategy was tremendously advantageous and was part of the reason why his teams were successful. Having matured and been exposed to a wide variety of different mental approaches in various fields, my view is vastly different. Every battle is not going up a hill to take on a well fortified position by a heavily armed opponent. Many business opportunities are difficult, but achievable. The same holds true in hotly contested political races. An accurate analysis of the task at hand, the risks, and where the difficulties lie is at the top of any kind of strategic overview for competitive situations. Overstating those challenges can make a tough task seem insurmountable, or a relatively simple assignment much harder. With that, let us turn to the financial markets and how this pertains to the current environment.

With ten days remaining in the third quarter, global financial markets remain on edge. One only needs to look at what transpired in the equity markets on Friday as an example. With about half the trading day remaining, market participants were informed the Chinese delegation, here to lay the groundwork for trade negotiations with the United States in October, had decided to leave the country early. You know what came next, the market sold off after starting the day positively. Earlier in the week, the Federal Reserve Board made the much anticipated decision to lower short term interest rates by twenty five basis points. Chairman Powell also faced a dillemma in the short term repo market this week and had to inject anywhere from 50-75 billion dollars per day to lower the repo rates for users (they had spiked from 2% up to 10%). After the Fed announcement, President Trump and his assistant, Peter Navarro, criticized Powell for being behind the curve. They wanted a fifty basis point cut to be more competitive with markets where interest rates are negative or zero. So, what comes next?

October quickly approaches, and already large players, most prominently Goldman Sachs, are warning of a very volatile month ahead. Earnings season will begin about ten days in, and the largest banks will initially be the center of attention. The energy area remains volatile as the recent events in Saudi Arabia certainly have heightened the tension around oil prices. Supply seems bountiful, and many believe weak demand in Asia, specifically China, will weigh on prices for quite some time. With the United States sending military personnel in the region, the Saudis are proclaiming lost production will come on line relatively quickly.

On the earnings front, FedEx and Adobe both gave poor guidance because of tough competition and, in the case of FedEx, unpredictability about global trade. On the consumer end, General Mills, Cracker Barrel, and Darden Restaurants showed solid results. Those numbers are consistent with the thesis the strength of the economy is with the consumers, with weakness in manufacturing or dependent on global supply chains. Now, let’s turn to the other wild card, the joy that is the political realm.

Anecdotally, a few weeks ago, I heard a prominent Venture Capitalist proclaim that Elizabeth Warren will win the Presidency and then markets will plummet. Last week, famed investor Leon Cooperman said warned of pretty much the same thing at the CNBC Delivering Alpha Conference. It does seem electric Elizabeth has quite a bit of momentum, as evidenced by twenty thousand people showing up in New York City to hear her roast big business and declare the system only working for the powerful. Is it possible she will be the Democratic nominee next year? Yes. Would she be a tough candidate to defeat? Yes. Is it a lock that she will defeat Mr. Biden and the rest of the hard working Democratic candidates? Not at all. Presidential politics is quite volatile, and usually the first two primaries, Iowa and New Hampshire, give a pretty good indication of how things will evolve. However, nominating contests take months to come to a definitive result, and only then will markets know who will be Mr. Trump’s ultimate opponent. As an investor, the 2020 Presidential election will clearly have massive ramifications, as well how both houses of Congress are composed. In the meantime, there is a year to go and plenty of information to digest in terms of where markets are headed. My own thinking is the economy is pretty good with consumers in good shape. The financial sector is well financed and capable of withstanding plenty of turmoil. In that light, staying positive and not overreacting to the wild sentiment swings based on politics or other world events is advised. I am hope you will heed Nietzsche’s advice and not make the task more difficult than it already is.