Purchasing managers’ surveys and the November employment situation reports are out this week.  We expect solid showing in both areas.


Friday brings the final employment report before the Federal Reserve’s December meeting.  Given other recent reports, we expect a solid report with monthly payrolls up ~200,000.  This should provide further justification for what is now a widely expected December rate hike.  We are also watching for the wage component and expect another strong rise in wages and salaries.  A 4-5% increase in year-over-year incomes seems easily in the cards and should garner significant attention.

The Institute for Supply Management’s Purchasing Manager’s Index (PMI) survey should also be positive.   We expect to see the index at levels that confirm expansion in manufacturing and the overall economy.  The bounce in U.S. manufacturing since the spring is mirrored by a manufacturing pickup overseas too.  Growth is likely set to pick up in income, demand, and investment given the trends we are seeing now.

The Federal Reserve Bank of Atlanta’s “GDP Now” model now sees the U.S. economy growing at a 3.6% annualized pace in the fourth quarter.  As the economy continues to grow, lingering slack from the recession is reduced.  The “output gap”, or the difference between the economy’s actual production and the economy’s “potential” (CBO estimate), is rapidly disappearing.  Today, the economy is producing about 1.5% below potential versus 6% below when the ’07-09 recession ended.

A renewed sense of positive economic momentum is helping to lift stocks and fostering risk taking.  Continued progress in jobs and wages is helping to support final demand.  Other indicators, including PMI’s here and abroad, also suggest a better supply side outlook for the United States.  These trends, which began to take shape in late spring and early summer, are likely to get an added boost from some form of “pro-growth” policy set under the incoming Trump administration. While little detail is known about the plan, we are adding 1% to our 2017-2019 real growth outlook to account for this anticipated fiscal policy tilt (more details and revisions to follow).

Given incoming data and above 50 reading on our WCA Fundamental Conditions Barometer, we remain overweight risk-oriented assets and underweight long-term Treasury bonds in our macro-driven tactical portfolio tilts.



Date Report Period Survey Prior
Monday, November 28: Dallas Fed Mfg Survey November 6.7
Tuesday, November 29: Real GDP – Q/Q change – SAAR 3Q2016 2.9%
S&P Case-Shiller HPI 20-city, SA – M/M September 0.2%
S&P Case-Shiller HPI 20-city, NSA – M/M September 0.4%
S&P Case-Shiller HPI 20-city, NSA – Y/Y September 5.1%
Consumer Confidence November 98.6
Wednesday, November 30: Fed Beige Book
Personal Income – M/M change October 0.3%
Consumer Spending – M/M change October 0.5%
ADP Employment Report November 147 K
Chicago PMI November 50.6
Pending Home Sales Index – M/M October 1.5%
Thursday, December 1: Weekly Jobless Claims November 26 251 K
ISM Mfg Index November 51.9
Total Vehicle Sales November 18.3 M
Domestic Vehicle Sales November 14.6 M
PMI Manufacturing Index November 53.4
Construction Spending – M/M change October -0.4%
Construction Spending – Y/Y change October -0.2%
Friday, December 2: Nonfarm Payrolls – M/M change November 161 K
Unemployment Rate November 4.9%
Labor Force Participation Rate November 62.8%
Average Hourly Earnings – M/M change November 0.4%



Based on our long-run capital market expectations, the “core” equity allocation in portfolios are underweight foreign equities / overweight large cap domestic growth, and underweight REITs / overweight Gold.  The “core” bond allocation is underweight long-term Treasuries / overweight corporate high-yield bonds.

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

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.


The WCA Fundamental Conditions Barometer measures the breadth of changes to a wide variety of fundamental data.  The barometer measures the proportion of indicators under review that are moving up or down together.  A barometer reading above 50 generally indicates a more bullish environment for the economy and equities, and a lower reading implies the opposite.  Quantifying changes this way helps us incorporate new facts into our near-term outlook in an objective and unbiased way.  More information on the barometer is found in our latest quarterly report, available at


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Kevin Caron, CFA, Portfolio Manager
Chad Morganlander, Portfolio Manager
Matthew Battipaglia, Analyst

Suzanne Ashley, Junior Analyst