Perspectives

To little surprise, the Federal Reserve hiked interest rates by 25 basis points following yesterday’s meeting.  Of much greater note are the hawkish changes made to the text of the Fed's statement (and with no dissents), as well as changes in the forecast materials.  While these changes are clearly in line with the continued improvement in economic data over recent months, it's a positive development from a Fed that has been exceedingly cautious over recent years in upgrading its outlook on… View More

Anxiety has heightened among investors and the wall of worry seems higher today than it was at the February market lows. Trade continues to be a prominent brick in the wall of worry and while it is a risk, it is manageable in our view. Even though it may seem like the US had a tough G7 meeting over the weekend. Data points (CEO Confidence, capex, unemployment, wage growth, PMIs, consumer confidence) still signal that there is time left in this business cycle and that the economy and markets can … View More

May Market Update In our January 2018 commentary, we stated that, "the S&P 500 is well above its historical average, but high valuations do not mean bear markets."  We further stated, "while these (years when the market is above its historical average) were not the market's highest returning years, compared to the 10-year Treasury, currently at 2.48%, it still looks attractive."  Reviewing the year to date numbers, as of May 31, 2018 the S&P 500 was up 2.0% whereas the Barclay's Aggre… View More

We note that the big story clients are concerned about remains the US trade policy, but the rapid acceleration of economic growth and the declining poll numbers for Democrats suggest that economic fundamentals are outweighing trade policy, at least for the time being. Fiscal policy (Tax Cuts) of $800bn this year dwarfs trade policy and most of the trade retaliation tariffs (Currently estimated at $80bn) are rounding errors in a $20 trillion economy. NAFTA remains the real risk and investors are … View More

Despite the fact that the US cycle is long in terms of time (9 years), there still seems to be pent-up demand and momentum in the economy, and we're adding fiscal stimulus on top of that. Inflation will rise in this environment, but only slightly, and we think more investment is likely, which will boost output per hour and release some strain on the system.   The ability to fully deduct capital expenditures for the next 5 years and the shift to a territorial tax system that frees up trillions … View More

Markets were mixed this week as small cap stocks rose while large cap stocks declined.  Oil prices continued to rise on the prospect of sanctions against Iran and reduced output from OPEC; Venezuela’s crude oil production, 800,000 barrels per day, is 65% below January 2016 levels.  Brent crude, the international benchmark, briefly surpassed $80 per barrel for the first time since 2014.  And, the PHLX Oil Service Sector Index rose 4.5% for the week to post a 24.5% gain since the end of March… View More

As investors continue to climb the wall of worry, we believe that the bar is set low for an upside surprise in the markets later this year. Stocks advanced last week as investor confidence in the economic and corporate outlook improved.  Lower-than-expected CPI (Inflation) and PPI (Producer Price Index) numbers,  combined with last week’s report of modest wage growth, eased inflationary concerns.  And, first quarter earnings season continued to outpace analysts’ estimates (more on this be… View More

Looking back on the last four months, to many of us it feels like the stock and bond markets have been run through the ringer. However, it really hasn’t been nearly as bad as it feels. We have certainly seen some big intra-day moves, but they have been both positive and negative. As of April 30th, the Dow Jones Industrial Average is down 1.6%, the S&P is down 0.4%, and the Nasdaq composite is up 2.7% for the year. In the bond market, the Barclay’s Aggregate Bond Index is down 2.4%, the S… View More

Stocks were mixed last week; the Nasdaq and Russell 2000® Index of small companies posted gains for the week while the Dow Jones Industrial Average, S&P 500® Index, and Russell Midcap® Index declined slightly.  Earnings continued to dominate headlines (more on this below) although impressive corporate results have not yet led to broad-based gains.  Still, the relative outperformance of small cap stocks may indicate a growing preference for riskier assets; historically, this area has ra… View More

Our call,  going a little against the grain, is that we may be closer to the middle of the economic cycle than the end and that the effects of the tax cut and fiscal stimulus will extend the cycle further than most think possible.  The ability to fully deduct capital expenditures for the next 5 years and the shift to a territorial tax system that frees up trillions of dollars in unrepatriated profits, provides major incentives for companies to invest in their own businesses. As a result, this… View More