Insight & Commentaries
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…
WASHINGTON CROSSING ADVISORS THE WEEK AHEAD Data points to above trend growth, below trend inflation, and no Fed action on rates. MACROECONOMIC INSIGHT Global and domestic growth continues to run above our long-run forecasts. A wide range of data suggests the global economy is performing well. For example, last week the European Central Bank raised their 2017 Euro-area growth forecast to 2.2%, the fastest pace since 2007. Meanwhile, the Federal Reserve Bank of Atlanta’s “GDP Now” model is tracking third quarter domestic growth near 3%. Japan is even growing at a healthy 2.5% pace, and China just reported a 7%…
THE WEEK AHEAD We update our Fundamental Conditions Barometer as we flip the calendar to September. MACROECONOMIC INSIGHT After reaching 80 earlier this year, our Fundamental Conditions Barometer has settled in at “cruising speed” (see chart below). Last month we rebalanced the satellite portion of the Conquest Portfolios to reflect the Barometer’s reading of 50. Overall, trends in the data we monitor remain positive. Look no further than last Friday’s Durable Goods Orders for July. Excluding transportation July’s Durable Goods Orders grew 0.5% on a monthly basis while Core Capital Goods grew 0.4%. The labor market has also displayed signs…
THE WEEK AHEAD We forecast that the accelerating growth phase of the past year will flatten out in the months ahead. A ramp-up in growth and investor risk appetite over the past year, courtesy of the dual “reflation” and “Trump” trades, helped lift earnings and share prices to records and volatility fell sharply. Our most recent read of the data suggests the acceleration phase may be over, and the forecast path of our WCA Fundamental Conditions Barometer (below) is expected to return to 50. At 50, we expect near-term recession risk to be near historically average levels. Where we go…
We enter the second half of 2017 with data coming in well, asset prices near records, and market sentiment good. Our analysis of current fundamental conditions points to continued growth, but the “reflation” and “Trump” trades may be losing some momentum. Portfolios are tactically tilted toward U.S. equities, with an emphasis on growth. Fixed income continues to focus on corporate bonds over Treasuries given our outlook. Full Text Here
The “reflation trade” that drove financial market behavior since the middle of last year lifted stocks and weighed on bond prices. This leaves us with an economy performing better and stock indices near records. Lower bond yields and higher equity valuations help lift short-term growth but also dampen our long-run return forecasts. In the months ahead, we expect to see the pace of improvement moderate compared to what we experienced over the past nine months. Equity allocations in portfolios were increased last summer, and we continue to maintain a modest tactical tilt toward large capitalization domestic stocks over bonds and…
THE WEEK AHEAD Markets digest last week’s failed vote on the American Health Care Act and begin to look forward to the upcoming earnings season. MACRO VIEW Congress abandoned a much awaited vote on The American Health Care Act on Friday. Uncertainty over the passage of the bill pressured equities, buoyed bonds, and weighed on the dollar last week. Markets recognize that prospects for potent tax cuts later this year was at least partly dependent on passage of the health care bill. Without funds resulting from the bill’s passage, the House of Representatives may struggle to pass a revenue neutral…
THE WEEK AHEAD We update our WCA Fundamental Conditions Index this week and forecast a period of moderation ahead. MACRO VIEW The Federal Reserve (Fed) delivered their third rate increase since 2015 last week. The increase in the federal funds target rate and rate paid on excess bank reserves was widely expected, however. Months of improving employment and inflation readings paved the way for the hike. Fed Chair Janet Yellen downplayed concerns over rising asset prices, full employment, and the size of the Fed’s balance sheet. Markets took the tone of the announcement as mostly dovish, or at least consistent…
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