Tactical Shift
It is hard to conclude almost anything with certainty amid this pandemic. Are schools open? Or closed? Or half-open and half-closed? There seems to be less unanimity in Congress on policy issues. The size of continued supplemental unemployment benefits was at issue before this weekend’s executive order. Republicans favored a $200 additional benefit, and Democrats wanted $600. President Trump’s $400 figure falls neatly in the middle of the $200-$600 range, but questions over the order and funding for the order remain. The “muddled middle” will have to suffice for now, but, by comparison, today’s situation is far better than where…
Against a backdrop of worry over trade and rising interest rates, the United States economy continues to perform well. While equity markets generally declined in 2018, investors in the United States generally fared better than overseas. Moreover, most companies saw revenue, profits, and dividends grow in 2018, and we expect more to come in 2019. This annual Viewpoint, along with quarterly updates, provides an organized way of looking at the economy, financial markets, and your portfolio. The full report is available by clicking the link below.
The U.S. economy is accelerating into the second half of the year with growth tracking toward 4% in the second quarter. However, the yield curve has flattened significantly as the Fed presses forward with rate increases, and trade concerns create some unease. Consequently, our own read of the data has become more mixed and we have tactically reduced exposure to stocks during the first half. Portfolios are overweight value versus growth, and foreign developed versus emerging. The fixed income posture is tilted toward high quality and shorter duration credit versus long-duration Treasuries. We also have a tactical tilt toward REITs…
Our 2018 Viewpoint begins on an optimistic note. Growth continues to pick up by most accounts, businesses are again investing, and asset values are near records. Confidence necessary for risk taking is apparent, and inflation remains at bay. On the other hand, we are now confronted with higher valuations in many asset classes, which we feel should eventually weigh on long-run returns. This annual Viewpoint, along with quarterly updates, provides an organized way of looking at the economy, financial markets, and your portfolio. Full Report Click Here
THE WEEK AHEAD Flush earnings still help, but higher interest rates and trade concerns hurt the bull case for stocks. MACROECONOMIC INSIGHT Not much happens when businesses, investors, and consumers decide to pull in their horns. Fortunately, the past couple of years have had most people feeling relatively optimistic about the outlook. Consumers are benefitting from full employment, rising wages, and increased wealth. Business owners and investors are reaping the benefits from a growing economy and large profits. For the past several years, no attractive “risk free” investment alternative existed to compete against riskier assets. One way to think about…
We see the economy on a growth track, but after a year of strong returns and historically low volatility, some moderation to growth and risk appetite seems reasonable. Continued economic growth, without a notable pickup in inflation, remains our dominant view. Last year’s tax changes, and new federal spending initiatives, have the potential to lift investment and speed up growth. Risks to our outlook include rising trade and geopolitical tension, elevated asset prices in some areas, and rising interest rates. During the quarter, we made a few tactical adjustments to portfolios. We tilted portfolios toward large cap domestic value, and…
It is not very often that emerging market equities trade with valuations this low compared to the S&P 500. Typically, emerging markets trade with a lower multiple than developed given greater risks. Yet, there have been few times over the last twelve years when emerging markets were valued this low on a price-to-earnings ratio basis compared with the United States. Lower relative valuations reflect a variety of concerns including commodity prices, credit quality, currency, and growth. All of these are valid things to be concerned about and we’ve written about them before. Still, we have seen emerging markets underperform their developed market counterparts for…
Our macro outlook is for slow growth and stubbornly low inflation. The start of policy normalization following years of zero interest rate policy in the United States comes at a time of weakening global growth and mixed signals from the domestic economy. We continue to view the United States economy as best positioned to weather the overall weak global environment that resurfaced in 2015. In this report, we take a long-term view and address expectations for markets over the long run. Full Report Click Here
The WCA Fundamental Conditions Barometer remains weak reflecting slower global growth. Our updated forecast has the barometer tracking toward 43 for October and remaining in the 40-45 range for the fourth quarter of the year. The bright spot remains domestic final demand which continues to plow forward on steady improvement in employment and wages. The pickup we saw from the second quarter is not continuing into the third quarter and both the IMF and the Atlanta Fed’s GDP Now forecast are being trimmed. The IMF again revised its global growth rate down to an estimated 3.1% for 2015 and the…
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