Newsletter

Summary: Threats to economic growth remain minor relative to underlying positives, in our opinion. Last week, markets fell as the Federal Reserve lowered interest rates, but signaled no future cuts. This was followed by Thursday’s announcement that the U.S. would impose a 10% tariff on $300B of Chinese imports. Both events served to stoke fears of slowing global growth. Our view remains more constructive due to our focus on the strong consumer (unemployment is at 50-year low), the innovative nature of U.S. companies and industries, and favorable conditions for access for capital, among both private and public companies. We continue to see the tariff and trade “war” talk as mostly noise relative to economic momentum.

Summary: We’ve hit the longest economic expansion and bull market in U.S. history, but it can continue, in our opinion. The market endured a terrible growth scare over October-December last year and again pulled back during May on concerns about tariffs. These worries were ultimately overwhelmed by a combination of ongoing strong economic conditions, and a Federal Reserve that appears willing to act to support equity prices. The possible resolution of tariffs is helping this morning. The duration of economic growth and the bull market are often cited by those predicting a downturn, but current conditions remain favorable, in our opinion.

Summary: Trade-related disputes and uncertainty will not derail economic growth, in our opinion. The market (the S&P500) has given back nearly 5% after hitting all time high levels on May 1 in response to the back-and-forth imposition of import tariffs between China and the U.S. The world’s two largest economies bickering cannot be construed as a positive. However, contextualizing this dispute suggests that the risk to world economic growth is likely overstated, in our opinion. Our base assumption is that the negotiating process will cause some disruption but not overturn the current favorable momentum of the U.S. consumer and U.S. economy nor reverse the share gains of companies with superior strategies or technologies.

Summary: The U.S. economy and the corporate earnings continued to grow in the first quarter, fueling the ongoing rally. The fourth quarter of 2018 saw investors sell stocks on the assumption that the Federal Reserve’s intention to raise interest rates would hamstring an already fatigued U.S. and global economy, probably sparking a recession. The year-to-date reversal, on the other hand, reflects the Fed’s pivot away from raising rates, ongoing growth in the economy and corporate earnings, and lately, investors chasing rising stock prices. At least that’s how we see the market’s action in the last few weeks. Our view: the opportunity to buy has passed but we remain bullish.

Summary:  Big rebound in stocks to start 2019 leaves professional worriers behind.  Stocks tanked in the last quarter of 2018.  Essentially, many investors had become convinced that a recession was on the horizon and competed with each other to sell stocks ahead of the expected bad corporate and economic news.  Why were investors convinced that things were turning south?  The most significant factor (but not the only one) was the Federal Reserve’s insistence on tightening monetary policy and apparent lack of sensitivity to markets.  Unfortunately for those who sold positions, the Fed subsequently completely changed its posturing and adopted a friendlier stance for stocks.  Simultaneously, economic data remained fairly robust, thus spurring a 12% rise in the S&P500 to start 2019. 

Summary: The market continues to oscillate between concern of slowing global growth and optimism that
U.S. economic expansion can be maintained.