Economy
The past year was marked by sharp swings in market confidence. After a brief period of heightened volatility and tariff-related anxiety, optimism returned quickly, driven by enthusiasm around artificial intelligence, expectations for policy support, and easing financial conditions. Equity markets ultimately reached new highs, reinforcing the role confidence and liquidity now play in shaping market outcomes. These developments have occurred against a backdrop of extraordinary aggregate wealth. Over the past decade, U.S. household net worth has nearly doubled, supporting consumption, investment, and risk-taking. In many respects, last year’s optimism was justified by subsequent economic and market performance. At the same…
Over the years, the investing thesis of Washington Crossing Advisors has endured; namely, buying quality companies at reasonable valuations. Through market peaks and troughs, unpredictable inflation and interest rate swings, and periods of volatile growth, WCA remains committed to owning predictable businesses with low debt and profitable assets. In doing so, we construct our equity portfolios with a keen focus on volatility, aiming to achieve a strong risk-adjusted return over time. The following commentaries dive deeper into our quality thematic while addressing commonly misunderstood investing conceptsthat could present hidden dangers in portfolios.
We agree with the Federal Reserve’s (Fed) decision to cut rates by 50 basis points. As we will explain, our own analysis of data throughout the past few months confirms the necessity of the Fed’s September rate cut but also highlights a potential underestimation of the economy’s weakening momentum since spring. In reviewing the Federal Reserve’s monetary policy actions throughout 2024, it’s essential to juxtapose their observations with our own insights derived from the WCA Barometer. The Barometer, a diffusion index measuring various economic inputs, provides a nuanced perspective on the evolving economic conditions. We use the WCA Barometer to…
As 2023 comes to a close and investors look back over the past two years, one can’t ignore the paradigm shift in rising interest rates and its far-reaching effects on markets and the economy. After all, investment portfolios, mortgages, savings accounts, and auto loans, to name a few, have been drastically impacted by rising interest rates, which stand at 5.25% today. To put it into perspective, we have not seen a Fed Funds Rate this high, achieved in such a short period, in over 35 years (see Chart A). Against a backdrop of high rates, risk, and recession uncertainty, it…
In 2018-2019, real estate company Zillow showed “for sale” inventory of U.S. homes between 1.2 and 1.4 million units. After the pandemic in 2020, that “for sale” inventory began a sharp decline to 440 thousand units in March 2022. In other words, in March, the supply of homes was about 1 million units short of, or 60-70% below, pre-pandemic levels based on Zillow’s data. At the same time supply was falling, demand was surging. Existing home sales surged by 1 million units above normal in 2020-2021, and new mortgages for purchases surged 40%. Remote work trends, federal stimulus, and record-low,…
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