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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 budget to the Senate. Without neutrality, a 60-vote point of order under “pay as you go” rules would lessen the size of any tax cut bill.

This is clearly a short-term blow to the president’s fiscal agenda. The struggle with the American Health Care Act reminds us that health care remains a most difficult political issue. Longer-term, there are many issues that will need to be addressed. For now, the agenda will move forward toward other items including regulatory and corporate tax reform. These issues appear to garner broader support in congress and with the public.

In the weeks ahead, markets will shift their focus to earnings reports and the expectations here are good. FactSet Research reports that analysts now estimate average 9% earnings growth for S&P 500 companies. This would be the highest rate of growth since 2011.

Markets will weigh the changing fiscal outlook against a background of improving earnings in the days and weeks ahead.

ECONOMIC RELEASES THIS WEEK

 

Date Report Period Survey Prior
Monday, Mar 27: Dallas Fed Manf. Activity Mar 22.0 24.5
Tuesday, Mar 28: Advance Goods Trade Balance Feb -$66.5B -$69.2B
Consumer Confidence Mar 113.6 114.8
S&P Corelogic Case-Shiller HPI SA M/M Jan 0.70% 0.93%
S&P Corelogic Case-Shiller HPI NSA Y/Y Jan 5.65% 5.58%
Wednesday, Mar 29: Pending Home Sales Index M/M Feb 2.2% -2.8%
Pending Home Sales Index Y/Y Feb 2.7%
Thursday, Mar 30: Weekly Jobless Claims Mar 25 245K 258K
GDP Annualized Q/Q 4Q2016 2.0% 1.9%
Friday, Mar 31: Personal Income Feb 0.4% 0.4%
Personal Spending Feb 0.2% 0.2%
Chicago PMI Mar 56.7 57.4
Consumer Sentiment Mar 97.6 97.6
Source: Bloomberg

 

ASSET ALLOCATION PORTFOLIO POSTURE

Based on shorter-term expectations, the “tactical” allocation within portfolios is underweight bonds / overweight stocks.

 

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


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