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Most of the data we examine is moving in a direction consistent with continued growth. This is being reflected in the performance of markets, which seem to be anticipating further growth ahead. Portfolios are tilted toward U.S. dollar assets, especially U.S. equities. Bond allocations are focused on shorter-duration and high-quality issues. We remain cautious on gold.
The second quarter showed a “bounce” in activity from the first quarter’s “dip.” The first quarter gross domestic product registered the first quarterly decline in three years during the first quarter. Steady final demand and the fading of weather effects and inventory drag are helping to right the ship. Foreign conditions are relatively weak, but we believe these trends are likely to reverse in the months ahead.
Our barometer for measuring changes in fundamental conditions is hovering just north of 50. Recent incoming economic data are also generally supportive of continued growth.
Indications of steady final demand by domestic consumers, along with improving cyclical components like production and orders, sets the stage for a bounce in activity through the second quarter.
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