THE WEEK AHEAD

Federal Reserve meets this week and is widely expected to deliver another rate increase.

MACROECONOMIC INSIGHT

We are seeing a small downshift in the pace of growth, based on incoming data. While not outright deterioration, there appears to be some softening in global economic momentum. This is not yet a major concern of ours, but some mixed signals have caught our attention. Here is a partial list of some of some of the items that have shown recent weakness:

1)     A three month decline in Chinese manufacturing surveys;

2)     A three month decline in German Business confidence;

3)     Two months of slippage in manufacturing orders relative to inventories;

4)     Upward creep in credit spreads; and

5)     Mixed domestic consumer spending figures.

There is nothing here that has us very concerned, and after months of upside surprises to growth, things were bound to settle down a bit. As our WCA Fundamental Conditions Barometer shows below, we expect to see some further easing in the near-term outlook for fundamental conditions and growth.

We are also monitoring changes in credit spreads and earnings forecasts. Investors priced in a lower recession and default risk and higher expectations for corporate profits in the last year. In the weeks following the tax cut, the spread on Baa corporate bonds tightened significantly versus long-term Treasury bonds. By late January, the spread was near a cycle low at 140 basis points (1.4%) over Treasuries. In the last month, the Baa spread widened to a 52-week high near 170 basis points (1.7%) as the stock market advanced and recouped most of its February decline. The signals given off by the stock and bond markets are more muddled now than several months ago. As for earnings, S&P 500 forecasted profit rose from $130 at the start of 2017 to $140 before the December tax cut. By the mid-February, the forecast surged to nearly $160. Since then, however, forecasts have flattened out and talk of tax cuts has been replaced by talk of tariffs and trade war.

While economists and policy enthusiasts seem concerned by talk of tariffs and reprisals, consumers are less worried. The University of Michigan Consumer Sentiment Survey for March recorded the highest reading since the 1997-2000 period. For all the worry over trade hitting the headlines recently, consumers say that they are as confident as ever.

We continue to believe that the economy remains on a growth track, despite some recent mixed signals. Equity exposure remains above neutral in tactical asset allocation portfolios, but we cut back equity exposure last week given the slippage in our WCA Fundamental Conditions Barometer (above).

ECONOMIC DATA THIS WEEK

Date	Report	Period	Survey	Prior
Monday, Mar 19:	No Economic Data
Tuesday, Mar 20:	FOMC Meeting Begins
Wednesday, Mar 21:	Fed Chair Press Conference
	Existing Home Sales M/M	Feb	0.4%	-3.2%
Thursday, Mar 22:	Weekly Jobless Claims	3/17	225k	226k
	PMI Composite Flash	Mar	—	55.8
Friday, Mar 23:	Durable Goods Orders	Feb	1.6%	-3.6%
	Durables Ex Transportation	Feb	0.5%	-0.3%
	Capital Goods Orders	Feb	0.8%	-0.3%
	Capital Goods Shipments	Feb	0.6%	-0.1%
	New Home Sales M/M	Feb	4.6%	-7.8%
Source: Bloomberg

ASSET ALLOCATION PORTFOLIO POSTURE

Based on shorter-term expectations, the “tactical satellite” allocation within portfolios is:

Overweight Stocks vs. Bonds

 Kevin Caron, CFA, Senior Portfolio Manager
Chad Morganlander, Senior Portfolio Manager
Matthew Battipaglia, Portfolio Manager
Suzanne Ashley, Analyst

(973) 549-4052

www.washingtoncrossingadvisors.com

www.stifel.com

______________________________________________________________________________________________________________________________________

Disclosures

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.

The information contained herein has been prepared from sources believed to be reliable but is not guaranteed by us and is not a complete summary or statement of all available data, nor is it considered an offer to buy or sell any securities referred to herein. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. There is no guarantee that the figures or opinions forecasted in this report will be realized or achieved. Employees of Stifel, Nicolaus & Company, Incorporated or its affiliates may, at times, release written or oral commentary, technical analysis, or trading strategies that differ from the opinions expressed within. Past performance is no guarantee of future results. Indices are unmanaged, and you cannot invest directly in an index.

Asset allocation and diversification do not ensure a profit and may not protect against loss. There are special considerations associated with international investing, including the risk of currency fluctuations and political and economic events. Investing in emerging markets may involve greater risk and volatility than investing in more developed countries. Due to their narrow focus, sector-based investments typically exhibit greater volatility. Small company stocks are typically more volatile and carry additional risks, since smaller companies generally are not as well established as larger companies. Property values can fall due to environmental, economic, or other reasons, and changes in interest rates can negatively impact the performance of real estate companies. When investing in bonds, it is important to note that as interest rates rise, bond prices will fall. High-yield bonds have greater credit risk than higher-quality bonds. The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage that is often obtainable in commodity trading can work against you as well as for you. The use of leverage can lead to large losses as well as gains.

All investments involve risk, including loss of principal, and there is no guarantee that investment objectives will be met. It is important to review your investment objectives, risk tolerance and liquidity needs before choosing an investment style or manager. Equity investments are subject generally to market, market sector, market liquidity, issuer, and investment style risks, among other factors to varying degrees. Fixed Income investments are subject to market, market liquidity, issuer, investment style, interest rate, credit quality, and call risks, among other factors to varying degrees.

This commentary often expresses opinions about the direction of market, investment sector and other trends. The opinions should not be considered predictions of future results. The information contained in this report is based on sources believed to be reliable, but is not guaranteed and not necessarily complete.

The securities discussed in this material were selected due to recent changes in the strategies. This selection criteria is not based on any measurement of performance of the underlying security.

Washington Crossing Advisors LLC is a wholly owned subsidiary and affiliated SEC Registered Investment Adviser of Stifel Financial Corp (NYSE: SF).