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Macro View Our fundamental view remains optimistic as we head into the final few weeks of the year. Overall, the growth thesis for the United States remains intact and the bout of volatility seen in October failed to produce any meaningful lasting drags or impediments to growth. With the Dow nearing 18K and the S&P 500 nearing 2100, the improvement in the outlook for the U.S. economy and earnings growth is clearly well recognized. Earnings growth for the third quarter will come in very close to 8% over last year’s results. As with the second quarter, the third quarter growth…
Macro View We are increasingly tied to goings on in the rest of the world especially as exports now account for a record 13.6% of gross domestic product. By that measure, trade’s contribution has never been more important to the U.S. economy than it is today. Last year, the United States exported $2.3 trillion in goods and services, which in turn supported 11.3 million American jobs. Over the last five years, the increase in U.S. exports accounted for approximately one-third of economic growth. Capital markets, too, have become inextricably intertwined. Global growth matters, therefore, and the news recently from many…
Macro View Fundamentals in the economy and capital markets continue to move in a positive direction and, at near 15x forward earnings, equities appear reasonably priced compared to Treasuries. Still, the changing dynamics of global growth, employment, and inflation are keeping markets attention. This week, politics will move to center stage as Americans go to the polls to cast their votes in midterm elections. Polling ahead of the midterms seems to favor Republicans given President Obama’s 40% approval rating and a historic bias against incumbents during midterm races. Republicans are looking to pick up six net seats in the Senate…
Most of the data we examine is moving in a direction consistent with continued growth. This is being reflected in the performance of markets, which seem to be anticipating further growth ahead. Portfolios are tilted toward U.S. dollar assets, especially U.S. equities. Bond allocations are focused on shorter-duration and high-quality issues. We remain cautious on gold.
The second quarter showed a “bounce” in activity from the first quarter’s “dip.” The first quarter gross domestic product registered the first quarterly decline in three years during the first quarter. Steady final demand and the fading of weather effects and inventory drag are helping to right the ship. Foreign conditions are relatively weak, but we believe these trends are likely to reverse in the months ahead.
Our barometer for measuring changes in fundamental conditions is hovering just north of 50. Recent incoming economic data are also generally supportive of continued growth.
Indications of steady final demand by domestic consumers, along with improving cyclical components like production and orders, sets the stage for a bounce in activity through the second quarter.
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