Monday Morning Minute 010218
We begin 2018 on a positive note. Last week’s Chicago PMI posted its third straight plus 60 score and is on the best streak for the index in over three years. We expect similar positive results this week from the various manufacturing reports released.
The theme of these reports is positive economic growth. After hovering around 2% for 2016 and into last year, GDP has topped 3% each of the last two quarters. We expect that this week’s data on manufacturing will point to an economy still enjoying a cyclical upswing. Macroeconomic Advisers and the Atlanta Fed’s GDPNow model expects 2.4% and 2.8% fourth quarter real GDP growth, respectively. Given our expectation for continued strong momentum through December, we could easily envision an even higher growth rate for the quarter when all is said and done.
Best wishes for a happy, healthy, and prosperous 2018!
ECONOMIC DATA THIS WEEK
|Monday, Jan 1:||New Year’s Day: Markets Closed|
|Tuesday, Jan 2:||PMI Manufacturing Index||Dec||55||55|
|Wednesday, Jan 3:||FOMC Meeting Minutes|
|ISM Manufacturing Index||Dec||58.2||58.2|
|Construction Spending M/M||Nov||0.7%||1.4%|
|Total Vehicle Sales||Dec||17.50M||17.35M|
|Domestic Vehicle Sales||Dec||13.25M||13.38M|
|Thursday, Jan 4:||Weekly Jobless Claims||12/30||—||245K|
|ADP Employment Report||Dec||190K||190K|
|Friday, Jan 5:||Change in Nonfarm Payrolls||Dec||188K||228K|
|Labor Force Participation Rate||Dec||—||62.7%|
|Average Weekly Hours all Employees||Dec||34.5||34.5|
|Average Hourly Earnings M/M||Dec||0.3%||0.2%|
|Average Hourly Earnings Y/Y||Dec||2.5%||2.5%|
|International Trade Balance||Nov||-$47.8B||-$48.7B|
|Factory Orders Ex Transportation||Nov||—||0.8%|
|ISM Non-Manufacturing Index||Dec||57.6||57.4|
ASSET ALLOCATION PORTFOLIO POSTURE
Based on shorter-term expectations, the “tactical” allocation within portfolios is overweight stocks versus bonds.
Kevin Caron, CFA, Senior Portfolio Manager
Chad Morganlander, Senior Portfolio Manager
Matthew Battipaglia, Portfolio Manager
Suzanne Ashley, Analyst
WCA Fundamental Conditions Barometer Description: We regularly assess changes in fundamental conditions to help guide near-term asset allocation decisions. The analysis incorporates approximately 30 forward-looking indicators in categories ranging from Credit and Capital Markets to U.S. Economic Conditions and Foreign Conditions. From each category of data, we create three diffusion-style sub-indices that measure the trends in the underlying data. Sustained improvement that is spread across a wide variety of observations will produce index readings above 50 (potentially favoring stocks), while readings below 50 would indicate potential deterioration (potentially favoring bonds). The WCA Fundamental Conditions Index combines the three underlying categories into a single summary measure. This measure can be thought of as a “barometer” for changes in fundamental conditions.
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