Insight & Commentaries
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.
A lull in the data through the winter months appears to be giving way to better economic performance as we head into the second quarter. Employment, production, and final demand seem to be firming now that the winter is over.
Ukraine’s interim government is calling for more support from its western allies to force Russian troops to leave the country, increasing pressure on the United States and Europe to craft an appropriate response. Ukraine adds further uncertainty on top of an already noisy data flow obscured by weather, inventory, and other effects.
There are signs that the economy is seeing some lift as we write this outlook for 2014. Not only has most of the economic data been behaving nicely of late, but private credit growth is picking up, fiscal drag is running off, and signs of a pickup in global growth are emerging.
A discussion of the potential impact of rising rates on the fixed income investor. The rationale behind a simple bond ladder is also featured.
One way to help minimize the impact of potential inflation on your purchasing power and lifestyle is to focus on stocks that have the potential to produce a rising stream of income. This report looks at the rationale behind investing in companies who regularly increase dividends.
Quarterly Report
Principles
Dividend Investing
