Monday Morning Minute 082817
THE WEEK AHEAD
We update our Fundamental Conditions Barometer as we flip the calendar to September.
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 of strength recently. After adding 209,000 jobs in July, expectations are for 178,000 jobs added in August (a sign that the economy may be nearing full employment), and the unemployment rate is expected to remain low at 4.3%.
Our forecast for the remainder of 2017 is for continued growth. In fact, our forecast for 3% GDP growth is just below the Atlanta Fed’s GDPNow forecast of 3.4% (see chart below).
ECONOMIC DATA THIS WEEK
|Monday, Aug 28:||International Trade in Goods||July||-$64.5B||-$63.9B|
|Tuesday, Aug 29:||Consumer Confidence||Aug||119||121.1|
|S&P CoreLogic CS 20-City M/M SA||June||—||0.1%|
|S&P CoreLogic CS 20-City Y/Y NSA||June||—||5.7%|
|S&P CoreLogic CS US Y/Y NSA||June||—||5.6%|
|Wednesday, Aug 30:||GDP Annualized Q/Q||2Q2017||2.7%||2.6%|
|ADP Employment Report||Aug||180K||178K|
|Thursday, Aug 31:||Weekly Jobless Claims||Aug 26||—||234K|
|Pending Home Sales M/M||July||0.6%||1.5%|
|Pending Home Sales NSA Y/Y||July||—||0.7%|
|Friday, Sep 1:||Change in Nonfarm Payrolls||Aug||178K||209K|
|Average Hourly Earnings M/M||Aug||0.2%||0.3%|
|Average Hourly Earnings Y/Y||Aug||2.6%||2.5%|
|Average Weekly Hours||Aug||34.5||34.5|
|Labor Force Participation Rate||Aug||—||62.9%|
|ISM Manufacturing Index||Aug||56.3||56.3|
|PMI Manufacturing Index||Aug||—||52.5|
|Construction Spending M/M||July||0.5%||-1.3%|
|Domestic Vehicle Sales||Aug||—||12.9M|
|Total Vehicle Sales||Aug||16.6M||16.7M|
ASSET ALLOCATION PORTFOLIO POSTURE
Based on shorter-term expectations, the “tactical” allocation within portfolios is equally weighted between bonds and stocks.
Client approved reports and commentaries click here
Kevin Caron, CFA, Senior Portfolio Manager
Chad Morganlander, Senior Portfolio Manager
Matthew Battipaglia, Portfolio Manager
Suzanne Ashley, Analyst (973) 549-4052
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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