Insight & Commentaries

2017 Third Quarter Asset Allocation Report

We enter the second half of 2017 with data coming in well, asset prices near records, and market sentiment good. Our analysis of current fundamental conditions points to continued growth, but the “reflation” and “Trump” trades may be losing some momentum. Portfolios are tactically tilted toward U.S. equities, with an emphasis on growth. Fixed income continues to focus on corporate bonds over Treasuries given our outlook. Full Text Here

Read More ›

The Case for Rising Dividends

We believe companies with a history of increasing dividends provide a good starting place in a search for fundamentally strong and growing companies. Importantly, steady dividend growth often follows consistent profitability and shareholder-focused management. A dividend growth perspective looks beyond today’s yield and considers other factors, such as quality, growth, risk, and value. A track record of dividend increases can be viewed as a tangible signal by a company’s management that they are both willing and able to boost a payment to shareholders. This commitment suggests quality fundamentals currently and an expectation of continued improvement into the future. Full Text

Read More ›

2017 Viewpoint

EXECUTIVE SUMMARY There are signs that growth is improving as we start the new year. The pickup began last spring, continued through the fall, and accelerated into year’s end. The surprise outcome of the election raised expectations for new tax, spending, and regulatory proposals, which could impact growth and business sentiment. The bond market is also taking notice of a changing landscape as interest rates price in some additional inflation. We start the year with a tactical tilt toward domestic equities and away from longer-term bonds. A portfolio strategy that combines a long-run point of view with some short-term flexibility…

Read More ›

Monday Morning Minute 091817

WASHINGTON CROSSING ADVISORS THE WEEK AHEAD Data points to above trend growth, below trend inflation, and no Fed action on rates. MACROECONOMIC INSIGHT Global and domestic growth continues to run above our long-run forecasts. A wide range of data suggests the global economy is performing well. For example, last week the European Central Bank raised their 2017 Euro-area growth forecast to 2.2%, the fastest pace since 2007. Meanwhile, the Federal Reserve Bank of Atlanta’s “GDP Now” model is tracking third quarter domestic growth near 3%. Japan is even growing at a healthy 2.5% pace, and China just reported a 7%…

Read More ›

Monday Morning Minute 082817

THE WEEK AHEAD We update our Fundamental Conditions Barometer as we flip the calendar to September. MACROECONOMIC INSIGHT After reaching 80 earlier this year, our Fundamental Conditions Barometer has settled in at “cruising speed” (see chart below). Last month we rebalanced the satellite portion of the Conquest Portfolios to reflect the Barometer’s reading of 50. Overall, trends in the data we monitor remain positive. Look no further than last Friday’s Durable Goods Orders for July. Excluding transportation July’s Durable Goods Orders grew 0.5% on a monthly basis while Core Capital Goods grew 0.4%. The labor market has also displayed signs…

Read More ›

Monday Morning Minute 072417

THE WEEK AHEAD We forecast that the accelerating growth phase of the past year will flatten out in the months ahead. A ramp-up in growth and investor risk appetite over the past year, courtesy of the dual “reflation” and “Trump” trades, helped lift earnings and share prices to records and volatility fell sharply. Our most recent read of the data suggests the acceleration phase may be over, and the forecast path of our WCA Fundamental Conditions Barometer (below) is expected to return to 50. At 50, we expect near-term recession risk to be near historically average levels. Where we go…

Read More ›

2017 Second Quarter Asset Allocation Report

The “reflation trade” that drove financial market behavior since the middle of last year lifted stocks and weighed on bond prices. This leaves us with an economy performing better and stock indices near records. Lower bond yields and higher equity valuations help lift short-term growth but also dampen our long-run return forecasts. In the months ahead, we expect to see the pace of improvement moderate compared to what we experienced over the past nine months. Equity allocations in portfolios were increased last summer, and we continue to maintain a modest tactical tilt toward large capitalization domestic stocks over bonds and…

Read More ›

Monday Morning Minute 032717

THE WEEK AHEAD Markets digest last week’s failed vote on the American Health Care Act and begin to look forward to the upcoming earnings season. MACRO VIEW Congress abandoned a much awaited vote on The American Health Care Act on Friday. Uncertainty over the passage of the bill pressured equities, buoyed bonds, and weighed on the dollar last week. Markets recognize that prospects for potent tax cuts later this year was at least partly dependent on passage of the health care bill. Without funds resulting from the bill’s passage, the House of Representatives may struggle to pass a revenue neutral…

Read More ›

Monday Morning Minute 032017

THE WEEK AHEAD We update our WCA Fundamental Conditions Index this week and forecast a period of moderation ahead. MACRO VIEW The Federal Reserve (Fed) delivered their third rate increase since 2015 last week. The increase in the federal funds target rate and rate paid on excess bank reserves was widely expected, however. Months of improving employment and inflation readings paved the way for the hike. Fed Chair Janet Yellen downplayed concerns over rising asset prices, full employment, and the size of the Fed’s balance sheet. Markets took the tone of the announcement as mostly dovish, or at least consistent…

Read More ›

Monday Morning Minute 031317

THE WEEK AHEAD The FOMC meets this week and is expected to deliver a rate increase. Wednesday’s announcement will be associated with a summary of economic projections and a press conference by the Chair. MACRO VIEW The return on cash hasn’t been much to write home about recently. As the economy picks up, expectations for short-term interest rates are perking up (graph below). A year ago, markets were pricing in an expectation for a 1.2% short-term interest rate by early 2019. Today, that same expectation is near 1.9%. As assumed cash returns rise, they compete against returns available on other…

Read More ›

Monday Morning Minute 030617

THE WEEK AHEAD The improving growth theme gets tested again this week with data on factory orders and employment. MACRO VIEW We are expecting to see a strong start to 2017, followed by a period of moderation through the year. We expect consumption to grow at a 5% annualized rate through the first quarter with investment growing at a 10% pace. If correct, the rolling four quarter average growth rate for the overall economy will be trending near 2.5% growth (chart below). This forecast incorporates our expectation for a March interest rate hike and recent readings from our WCA Fundamental…

Read More ›

Monday Morning Minute 022717

THE WEEK AHEAD We expect good reports this way on durable goods and manufacturing this week, consistent with other recent data points. The improvement in the business outlook is being clearly embedded in market expectations. MACRO VIEW It has been more than 90 months since the last recession. Expected tax cuts, infrastructure spending, and regulation are fueling consumer and business optimism. In turn, this optimism is helping lift the stock market to records. Given this, we want to spend a minute to remind ourselves how we got here. During the ’07-09 recession, the U.S. stock market had an average value…

Read More ›

Monday Morning Minute 022017

THE WEEK AHEAD Quiet week on the data front this week, but the Federal Reserve (Fed) releases minutes from their latest meeting. MACRO VIEW Last week, the February Philadelphia Business Outlook Survey (BOS) reached 43.3, a level not seen since 1973. The three month moving average rose to 24.9 which was last achieved in 2004 shortly after Congress signed the  Jobs and Growth Tax Relief Reconciliation Act of 2003. Both is 1973 and 2004, the economy posted the best growth of the respective decades. Why is the report important? For one, it focuses on a very important component of the…

Read More ›