Posts Tagged "barometer update"
Over the past year, the economy and financial markets have surpassed most forecasters’ expectations. The U.S. economy grew at an annualized rate of 5% in the third quarter of 2023, with falling inflation, stable employment, and a rise in the S&P 500 stock index.
We start 2023 coming off a tough 2022 for both stock and bond investors, where both assets suffered significant declines. However, inflation issues and higher interest rates, which dominated market focus last year, will likely fade in intensity in 2023.
Amid an otherwise positive backdrop, supply shortages, uncertainty over economic policy, and high valuations for financial assets are apparent. We remain tactically overweight stocks, but reduce exposure, shifting somewhat toward bonds. This report addresses how WCA tactical portfolios are positioned now to address short and longer-term factors.
WCA fundamental conditions barometer increases slightly in October. Tactical asset allocation sees a small increase in equity versus bonds.
The first half of the year saw a turnaround in several indicators we watch. While bonds managed to outperform stocks in the first half, signs of improvement in the domestic economy are emerging. Our read of recent trends in the data gives us a basis for optimism on near-term growth. Overseas prospects are still fading, and growth rates are still coming down. Britain’s “exit” referendum poses challenges to Europe at a time when growth is already weak, for example. Our WCA Fundamental Conditions Barometer remains below 50, but is showing signs of improvement. The “core” of portfolios were recently rebalanced…
MACRO VIEW We are not in a recession, but we are seeing data that is uncharacteristically weak for an expansion. The last quarterly GDP report showed 0.7% annualized growth for the latest quarter with real GDP up just 1.8% over the year prior (below). This growth is too weak for comfort as it leaves the economy more exposed to a potential recession in the event of a unforeseen shock. Headline inflation of 0.4% is still well below the Federal Reserve’s (Fed’s) target and core personal consumption expenditure prices are up just 1.2% through December compared to a year earlier. January’s…
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