Long Run Views

Viewpoint 2019

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.

Read More ›

China has been a major contributor to the global growth story in recent years, and has had a big impact on developments in foreign and emerging markets. As we’ve noted in previous commentary, we have been seeing some weakening in growth outside the United States while growth here remains strong. A 30% drop in the Chinese stock market, a sharp reversal in the Chinese currency, and slowing output growth all point to accumulating foreign sector weakness. Within China, the Chinese government has increased stimulus as evidenced by a recent surge in local government bond issuance (chart, below), and the Peoples…

Read More ›

2018 Viewpoint

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

Read More ›

WASHINGTON CROSSING ADVISORS THE WEEK AHEAD Big week for data and Fed policy this week. MACROECONOMIC INSIGHT We’ve seen some slowing in growth lately, but last week’s advance U.S. Gross Domestic Product report was encouraging. Readers of the Monday Morning Minute know that incoming data raised some red flags in the first quarter. Our Fundamental Conditions Barometer peaked with the passage of the tax act in December, declined through the remainder of the winter, and stabilized in April. According to last week’s report from the Bureau of Economic Analysis, the U.S. economy grew by an estimated 2.3% in the first…

Read More ›

THE WEEK AHEAD Volatility continues amid headline noise on trade. MACROECONOMIC INSIGHT Recent headlines have been enough to unnerve even the most seasoned investor. The tension between the United States and the rest of the world seems to increase daily. On Friday, the United States threatened to levy another $100 billion of tariffs on Chinese imports, which would bring the total to $153 billion. Because the United States exported only $130 billion to China last year, it may prove tough for China to reciprocate in kind. While much of this is likely posturing ahead of some final agreement, the tone…

Read More ›

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…

Read More ›

THE WEEK AHEAD MACROECONOMIC INSIGHT The drop in stocks from January 26 erased 10% from the market averages. There have been at least two dozen declines of 10% or better over the last 30-years, to put things in perspective. Very few other indicators show a spreading of concern into other areas of the markets or the economy. In the past week, corporate credit spreads remained unchanged; forecast inflation was down only slightly; and S&P 500 earnings forecasts rose. Investors can take some comfort in knowing that a broader reading of the market’s “tea leaves” continues to point toward growth. Source:…

Read More ›

MACROECONOMIC INSIGHT We begin 2018 on a positive note. Last week’s Chicago PMI posted its third straight plus 60 score and is on the best streak for the index in over three years. We expect similar positive results this week from the various manufacturing reports released. The theme of these reports is positive economic growth. After hovering around 2% for 2016 and into last year, GDP has topped 3% each of the last two quarters. We expect that this week’s data on manufacturing will point to an economy still enjoying a cyclical upswing.  Macroeconomic Advisers and the Atlanta Fed’s GDPNow…

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 ›

The first half of the year saw a turnaround in several indicators we watch. While bonds managed to outperform stocks in the first half, signs of improvement in the domestic economy are emerging. Our read of recent trends in the data gives us a basis for optimism on near-term growth. Overseas prospects are still fading, and growth rates are still coming down. Britain’s “exit” referendum poses challenges to Europe at a time when growth is already weak, for example. Our WCA Fundamental Conditions Barometer remains below 50, but is showing signs of improvement. The “core” of portfolios were recently rebalanced…

Read More ›

Weekly Comment

Productivity growth averaged 3% through the 1950s and 1960s, declined to 2% from the mid-1970s through 2007, slid to just over 1% since the 2008-2009 recession, and fell to under 0.5% last year.  We are at serious risk of stagnating growth, should this trend continue.  In such an environment, tactical approaches will be required as long-run returns would tend to diminish with real growth rates.  Currently, we see recession risk above historic averages, given generally weakening global data.  This slippage in fundamentals that became more evident in late 2015 contributed to our elevated focus on quality in equity portfolios and…

Read More ›

THE WEEK AHEAD The Federal Open Market Committee (FOMC) conducts their March meeting on Tuesday and Wednesday. Growth overseas remains sub-par, but U.S. consumer spending is stronger and monthly job gains are up 235,000 over the last six months. Signs of moderate inflation can are evident in the personal consumption expenditures price index.  This index rose 1.3% year-over-year in January. MACRO VIEW All the churn in markets during the first quarter had little impact on our assessment of fundamentals.  Our WCA Fundamental Conditions Barometer remains below 50 and portfolios are defensively allocated.  The latest actions by the European Central Bank…

Read More ›

WCA Weekly Update

Light economic data from the United States expected this week, and the European Central Bank (ECB) is expected to deliver additional monetary stimulus.  China releases February’s Merchandise Trade Balance, Consumer Price Index, and Producer Price Index while Japan and the EU both release their latest GDP prints. MACRO VIEW We are looking for signs of an upturn in the data when we update our WCA Fundamental Conditions barometer and forecasts next week.  For now, we view the recent stabilization in commodities and better tone in the stock market as providing some reason for optimism, but we need further evidence that…

Read More ›

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  

Read More ›

The United States appears to be generating better growth these days when compared to estimates of its potential.  The graph below shows how the United States’ output has risen by more than the potential growth estimated by the Congressional Budget Office.  For seven quarters in a row, the economy has produced a higher growth rate than potential, which is absorbing excess capacity.  As this happened, the unemployment rate fell to near 5% from 10% back in 2009.  The total number of hours worked has expanded by 10% over that period as more jobs were added than lost.  Capital investment has…

Read More ›