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).



Date Report Period Survey Prior
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
Personal Income July 0.3% 0.0%
Personal Spending July 0.4% 0.1%
Chicago PMI Aug 58 58.9
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
Unemployment Rate Aug 4.3% 4.3%
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%
Underemployment Rate Aug 8.6%
ISM Manufacturing Index Aug 56.3 56.3
PMI Manufacturing Index Aug 52.5
Construction Spending M/M July 0.5% -1.3%
Consumer Sentiment Aug 97.3 97.6
Domestic Vehicle Sales Aug 12.9M
Total Vehicle Sales Aug 16.6M 16.7M
Source: Bloomberg


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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