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The S&P 500 returned 13.7% in the first quarter, the best quarterly performance since 2009. This follows almost a 20% drop in the S&P 500 during the fourth quarter. The concerns about global growth and rising interest rates, which contributed to last fall’s market selloff, appear to be easing. The WCA Fundamental Conditions “Barometer” advanced sharply in the past few weeks as signs emerged that growth may be picking up in the United States. Accordingly, equity exposure was increased and bond portfolio duration reduced across tactical asset allocation models. Full Report Click Here
Analysts have come to believe that S&P 500 companies failed to grow earnings during the just completed first quarter. Moreover, the forwards market for short-term interest rates sees no further U.S. rate increase on the horizon. Global bond markets are, once again, priced with negative yields in Germany, Japan, Spain, and France. The U.S. Treasury curve is flirting with inversion, where long-term rates fall below short-term rates, which can be a recessionary signal. Despite this backdrop, investors returned to equities in the first quarter of 2019. A Turning Point? Undoubtedly, the International Monetary Fund will weigh in on the state…
As has been the case for the past year, worries over global growth continue to dog markets. Last Friday’s large miss on Germany’s purchasing managers index is more evidence that global growth has turned sour (Chart A, below). Some hoped that a better result would be seen from Germany given that order rates have held up. However, the 44.7 reading on the index is far below 50, creating cause for further concern about Europe. The miss follows earlier warnings on growth from the European Central bank, who recently issued a cut to their outlook. Bloomberg’s estimate of 2019 German growth…
Investor expectations are usually anchored by central bank expectations which is why central bank statements deserve much attention. This Wednesday’s update on monetary policy from the Federal Open Market Committee (FOMC) is especially important given the FOMC’s recent pivot to “patience.” Market expectations are now set for an 85% probability of no further rate increases this year. The process of reducing short-term rate expectations, which began last fall, has now rippled through global financial markets, dampened volatility and helped buoy stocks so far in 2019. As the Federal Reserve gets ready to release an updated “dot plot” this Wednesday, the…
THE WEEK AHEAD Is A Turn At Hand? If the U.S. expansion makes it to March, it will match the 1990s expansion as the longest on record. But the last few months have seen a slowing in global growth and a pickup in market volatility. Even though the current data flow remains mixed, global growth could improve because worries over trade and tightening monetary policy have faded and policy changes suggest stabilization. Our WCA Fundamental Conditions Barometer (chart, below), which measures broad changes in the growth outlook, improved slightly in the past month, but remains at levels suggesting some continued…
Data supports market momentum into the new year: Portfolio manager from CNBC.
Jim Lowell, Adviser Investments, and Kevin Caron, Washington Crossing Advisors, provide their outlook on the markets and economy in 2018. The only question for us is at some point valuations are beginning to look a little rich, says Caron.
Global Trends Remain Negative The contrast in performance between the U.S. economy and the rest of the world is a major theme these days. Since the beginning of 2018, a marked worsening of foreign conditions is obvious, and we expect our WCA Fundamental Conditions Barometer to register weakness when it is updated next week. Globally, we see energy and industrial metals trending lower. In Asia, we see financial conditions tightening as Chinese manufacturing fades. Brazilian industrial production has slid. European growth is slowing as financial conditions and the business sentiment turn down. The foreign piece of the global outlook is…
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