Insight & Commentaries

When Patience is a Virtue Patience is a virtue when it leads to good judgement. Last week, this kind of patience was on full display as Federal Reserve Chairman, Jerome Powell, delivered a dovish outlook on monetary policy. The more hawkish message of last summer and early fall is now gone, and rightly so given trends in the data since then. Specifically, a sharp spike in market volatility last fall, and clear signs of slowing global growth, has led to this moment. Ongoing Chinese trade and Brexit negotiations also compelled the change in attitude. We are happy to see the…

Read More ›

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…

Read More ›

Some Start of Year Housekeeping At the start of each year, we take some time to lay out the expectations that drive tactical decisions in the CONQUEST portfolios. We also engage in a few “housekeeping” activities to keep portfolios properly aligned with their respective benchmarks. The 2019 Viewpoint is now available and is a great resource to accompany the CONQUEST Tactical ETF portfolios. To order hard copies of the report, please drop us an email with the number of reports you want sent to you. CONQUEST 2019 Housekeeping Increasing Allocation to “Satellite”: As we discuss in our 2019 Viewpoint, we…

Read More ›

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 ›

Closing out short-duration tactical tilt as curve flattens. Ahead of the Curve   We increased duration in portfolios as the long-term Treasury yields fall below 3%. Throughout the year, we pointed out that foreign conditions were weighing on the outlook. Growth expectations are lower now than in the beginning of the year, and many stock markets around the world are negative for the year. Bulls appear to be pulling in their horns amid concerns over trade, Brexit, and higher short-term interest rates. While Treasury bond yields have been rising for most of the year, that trend now appears to have…

Read More ›

An update on CONQUEST tactical portfolio strategy as we get set to close out the year. How About the Economy?   Why should an investor care about keeping track of the economy? Isn’t it enough to just create a “set it and forget it” portfolio? We think investors should care about the economy for two reasons. First, theups and downs of the economy creates risks to avoid and opportunities toexploit. Second, the size of the economy determines the value of the stockmarket and drives long-run return. This is why we, as active managers, devoteso much time evaluating economic data. Near-Term…

Read More ›

November’s Data If all you did was focus on the United States’ economy, you would conclude that October was a very good month. Over the past two weeks we learned that in October: Workers hourly wages shot up 3.1% from a year earlier, the best performance in a decade; U.S. Manufacturing activity remains solid (the Institute for Supply Management’s Purchasing Manager’s Survey is solidly in the 55-60 range); Core domestic retail sales are up a whopping 5%, year over year, continuing a very strong upward trend. These sorts of readings are unmistakable positives for the United States’ economy, and in…

Read More ›

We update our WCA Fundamental Conditions Barometer for October and consider what might be driving some of the recent pickup in equity market volatility. Foreign Conditions Remain Weak Evidence continues to mount that much of the global economy is coming under pressure. Last week brought news that China’s manufacturing sector worsened in October, along with output in September in South Korea,Japan, and Taiwan. A chill is also taking hold in Europe, evidenced by a halving of the third quarter growth rate, just as inflation is picking up.Emerging markets finished out October with losses, evidencing growing doubts about growth. Our WCA…

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 ›

THE WEEK AHEAD Volatility picked up again last week as the Dow Jones Industrial Average fell by more than 3% on Wednesday alone. For the week, the Dow was down 4%, having bounced back from an intra-week drop of almost 6%. Wednesday’s drop marked the second day this year where the Dow fell by more than 3%. Sharp declines have become more common compared to past decades. Daily drops of 3% or more in the Dow occurred only twice during all of the 1960s; five times during the 1970s; fifteen times during the 1980s; and ten times during the 1990s….

Read More ›

The Bond Market Stirs The U.S. 10-year Treasury bond yield backed up toward 3.25% last week — levels not seen since 2011. Comments by Federal Reserve Chairman Jerome Powell point toward higher rates, perhaps higher than the market currently expects. Economic growth remains strong, labor conditions are growing tighter, and inflation expectations are becoming less clear. Markets have heretofore priced in a very shallow path for future rate increases, but that perception may now be changing given an unemployment rate near 50 year lows and market-implied long-run inflation forecasts are above 2% and moving higher. The net effect of changes…

Read More ›

Ten years after the financial crisis, the United States equity, real estate, and job markets are back to records. Household wealth has, therefore, surged to a record $106 trillion. Most of the trends we see in the domestic data flow remain strong, although conditions overseas paint a less compelling picture. With much of the slack in the domestic economy gone, and inflation near target, we expect the Federal Reserve to continue normalizing interest rates. Portfolios are tactically overweight value stocks, domestic and developed equities, short duration Treasuries, and real estate. Tactical underweights include growth, foreign and emerging markets, long-duration Treasuries,…

Read More ›