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THE WEEK AHEAD We update our barometer and tactical positioning for June. MACROECONOMIC INSIGHT Our forecast path for the WCA Fundamental Conditions Barometer declined in June (chart, below), and now sits just below 50. The decline in the index from above 70 at the start of the year suggests that risk appetite has waned somewhat. Accordingly, we trimmed back the equity exposure in the satellite portion of tactical portfolios to 45% from 55% last month. Why is this happening? A closer look at the data shows some evidence of softening in Europe, a build in domestic inventories, wider credit spreads,…
The WCA barometer holds steady through April, tactical stock / bond mix unchanged. MACROECONOMIC INSIGHT The last month’s data show signs of resilience following a sharp spike in volatility in February and March. The WCA Fundamental Condition Barometer (Graph 1, below) shows a forecast path that remains above 50, but is declining. Our forecast base case is unchanged from last month, suggesting some stability after some weakening trends in February-March. Thus the near-term prospects for continued growth are good, but some moderation looks reasonable. This forms the primary justification for our near-term view to be tactically overweight equities in asset…
THE WEEK AHEAD We look at how rising interest rates could harm returns for some highly-leveraged firms. MACROECONOMIC INSIGHT Some firm are paying more to borrow money, which is weighing on stock price performance. The world’s most widely used benchmark for pricing loans and specifying financial contracts is the London Interbank Offered Rate, or LIBOR. The rate for 30-day LIBOR stands near 2.4%, about double the level of a year ago, and most of the rise occurred in the last four months (chart, below). Over $5 trillion of business and consumer loans reset relative to LIBOR, making this a key…
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…
THE WEEK AHEAD Busy week ahead for data as we begin to get an early read on February data. MACROECONOMIC INSIGHT Since early 2016, incoming data has told the story of improving global growth. Today, our WCA Fundamental Conditions Barometer (below) remains above 50 supports a bullish case. We attribute the 30% rise in U.S. stock values to improving earnings, which in turn, reflect better growth. Further augmenting the earnings outlook, and the run-up in stock values, was last year’s tax cut. That cut will begin to filter into reported profits in the months ahead, and into withholding tables very…
THE WEEK AHEAD Growth story continues to lift equities, but faster growth is beginning to stir concerns over rates and inflation. MACROECONOMIC INSIGHT We have seen constant upward revisions to earnings and growth estimates for the last year, creating the backdrop for good equity market performance. A combination of easy monetary policy, improving growth, and strong sentiment are driving continued upside surprises for growth. Leading economic indicators remain strong, employment trends are solid, business investment is picking up, and order rates for durable goods are surging. Our own WCA Fundamental Conditions Barometer (below) surged through the later part of 2017…
WASHINGTON CROSSING ADVISORS THE WEEK AHEAD A relatively quiet week for economic data, but new records on the Dow and S&P 500 have us thinking again about the “big picture.” MACROECONOMIC INSIGHT With the Dow just surpassing 25,000 and the S&P 500 crossing 2,700 for the first time in history last week, we thought it makes sense to pause and take a step back. As we point out in our Viewpoint 2018, we see the growing economy as the key driver of the market’s record-breaking performance, and there is clear evidence that growth continues. However, we must also point out…
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
THE WEEK AHEAD A busy week ahead including a Federal Open Market Committee (FOMC) meeting, announcement on a selection for next Federal Reserve (Fed) Chair, possible release of some details for the tax plan, and a look at the September employment situation. MACROECONOMIC INSIGHT President Trump is said to be leaning toward naming current Fed governor Jay Powell as the next Fed chair. The President has previously indicated he will make his decision before he leaves on his next foreign trip next week. Friday’s employment report is expected to show the economy added 308,000 jobs in October and the unemployment…
We prepare to end 2017 with consumer and investor confidence running high, but we are mindful of potential longer-term speed bumps. Portfolios are neutrally weighted between stocks and bonds as we enter the fourth quarter. Full Text Here
THE WEEK AHEAD We update our input tables to our long-run forecast and tactical top-down investment process. MACROECONOMIC INSIGHT Each quarter, we update a series of tables that lie behind our long run tactical asset allocation decisions. These are all forward-looking assumptions and are inherently imperfect estimates of the future. Still, these base-case assumptions are necessary and important inputs that form the basis for our top down investment process. The ratcheting down of our WCA Fundamental Conditions Barometer (currently near 50 vs. 75 at the start of the year), faster than expected rate increases, stubbornly low inflation, improving overseas trends,…
THE WEEK AHEAD Markets (and the Federal Reserve (Fed)) get a read on the health of the labor market as the September Employment Report is released on Friday. MACROECONOMIC INSIGHT Friday’s report is expected to show that the economy added 70,000 jobs while the unemployment rate remained steady at 4.4%. While much airtime will be spent dissecting those headline figures, we want to focus on two other aspects of this report: the change in private payrolls (Chart A) and the yearly change in average hourly earnings (Chart B). While the trend for both of these figures is generally positive, recently…
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