Long Run Views
President Trump’s April 2 tariff announcement marks a pivotal moment in global economic policy, reflecting a broader shift from globalization toward protectionism and nationalism. While globalization delivered real benefits—lower inflation, expanded trade, and economic growth—its effects have become more contested. Events such as 9/11, the financial crisis, and the COVID-19 pandemic exposed vulnerabilities, contributing to rising skepticism about global integration. A growing number of voters and policymakers, across party lines, now question whether globalization serves their long-term interests. The result is a changing policy landscape marked by tariff actions, tax debates, and strategic repositioning. In this uncertain environment, we believe…
The U.S. economy in 2024 showed remarkable resilience against inflation, rising interest rates, and global uncertainties. GDP expanded, consumer confidence stayed strong, and household wealth hit $155 trillion. This reflects America’s economic strength, driven by innovation and industrial capacity, though vulnerabilities remain. Fiscal shifts in 2025 offer potential gains but will test the economy’s ability to sustain momentum. The S&P 500’s rise highlights earnings growth and multiple expansion but reveals risks tied to the dominance of the “Magnificent 7.” Concentration risks persist, even as diversification provides balance. With returns likely to moderate, strategic positioning will be critical to navigating the…
U.S. stock market valuations have reached a historic $60 trillion, with GDP and household net worth doubling since 2009. Employment has grown by 30 million jobs, and S&P 500 profit margins have expanded significantly. However, declining earnings yields suggest stretched valuations, indicating potential risks ahead. Despite differing methods, as the election approaches, both major candidates share goals for developing the labor force, improving housing, and regaining energy leadership. Given these conditions, diversification is prudent; bonds, gold, and emerging markets offer viable alternatives as the Federal Reserve’s (Fed) policies weaken the dollar. Tactical adjustments are needed to balance growth opportunities and…
The U.S. economy grew to a record $28 trillion annualized in Q1, the equity market added $9 trillion over the past year, reaching a record $57 trillion, and our WCA Barometer shows positive (albeit fading) strength. Despite this, popular indices’ gains are driven by a few mega-cap companies, leading to less diversification. Historically, smaller companies thrive in expansions and high-risk environments, yet today’s market favors mega-caps. In this update, we address investor concern about growing market divergences between large and small, how we believe portfolios should be positioned to benefit from what comes next, provide an update of current conditions,…
Although the economy is faring better than expected this year, we see a mixed bag of signals. Forexample, while popular market-capitalization weighted stock indices are up for the year, the average stock is essentially flat. Moreover, the outlook for corporate profits and capital spending are flattening out, suggesting muted growth in the private sector ahead. Similarly, monetary and fiscal policies have diverged. Monetary policy is restrictive (higher interest rates), while fiscal policy is expansive (rising deficits). Cross currents such as these lead to a neutral read of incoming data, suggesting we keep portfolio risk exposure very close to benchmarks.
As we pointed out in our Viewpoint 2023, the air of gloom that hung over markets at the start of the year was extreme. Instead, we saw improving fundamentals and opportunity for the situation to play out better than expected. So far, the economy and markets have proven resilient in 2023 with equity markets and the economy turning in better-than-expected performance. While the economy rolls along, however, there are some crosscurrents in the data leading us to avoid large tactical bets at the moment. Conquest Portfolios
Surging inflation and interest rate expectations undermined stock and bond markets last year. There are nascent signs these trends may be reversing. Accordingly, stocks and bonds have rallied so far in 2023, despite the emergence of concerns in the banking sector. After a period of being slightly underweight equities, we have aligned tactical portfolio risk exposure close to benchmarks to reflect improvement in our WCA Barometer, coupled with a wide band of uncertainty around the forecast. Conquest portfolios
Central Bank all in to fight inflation Markets signal inflation to fade Rates to push higher still Policymaker credibility key to fight Valuations more attractive. We remain cautious based on incoming data and enter the final quarter underweight risk assets.However, policy priorities seem to be having some positive effect on expected inflation, despiteupsetting financial markets. This is a difficult and complex environment, and we continue to followour tactical discipline in navigating a very unusual year. While we are not out of the woods yet,valuations are becoming better as are longer-run expectations for returns.
Set against a backdrop of rising inflation and interest rates, calls for a “technical recession” are growing. Our check of the data leads us to maintain our near-term, tactical “underweight” to stocks. However, the correction in stock prices contains a silver lining as valuations have become better, boosting long-run return expectations.
The first quarter brought a surge in inflation and war in Eastern Europe. This environment imposes a new reality on investors and policymakers. In this report, we discuss what is happening and how our top-down portfolios are positioned now.
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