|January 3, 2018||
What has driven your bullish outlook on U.S. equities and how do you like the asset class heading into 2018?
Our model indicated a relatively bullish outlook for the U.S. equity market with stronger sentiment and macroeconomic signals. Leading sentiment indicators climbed or stayed at high levels in 2017 and producer sentiment recently strengthened. The ISM manufacturing index remained solid the last three months driven by the belief that the U.S. manufacturing conditions are improving as the global economy has strengthened and the U.S. dollar has depreciated. The homebuilder sentiment index also climbed steadily this quarter hitting 74 in December, the highest level since July 1999, indicating that the housing market is well positioned for growth in the coming months. Macroeconomic data became more bullish with the labor market continuing to tighten. Weekly initial jobless claims fell four consecutive weeks in late November and early December while industrial production posted steady gains for the last three months of the year.
We remain cautiously optimistic heading into 2018, seeing both strong growth indications as well as some cautious signals. The steady pace of economic growth is likely to be among the most significant drivers for the domestic equity market going forward. With the tightening labor market, wage growth, and surging stock and housing prices, consumers were one of the strongest sources of growth and will be looked upon to continue driving the economy moving forward. However, with the winding down of quantitative easing and possibly higher interest rates, risks remain for U.S. equity prices. We monitor these risks daily, especially as stock market valuations remain stretched.
For more commentary from CIO Patrick Jamin on the final quarter of 2017, Click Here
|October 5, 2017||
How do you like the prospects of large-cap U.S. equities for the upcoming quarter?
Our model is cautiously bullish on U.S. large-cap equities. Although the valuation and sentiment signals remained relatively weak compared with other international equity markets, the fundamentals of the U.S. economy are still strong. The macroeconomic data that weakened, such as industrial production and initial jobless claims, was partially due to hurricanes Harvey and Irma. We expect the Texas energy and Florida tourism industries to be operating at close to normal levels by the end of the September. The expected recovery of Puerto Rico and surrounding areas from Hurricane Maria is yet to be determined. Rebuilding from the storms will boost GDP beginning in the fourth quarter and into 2018, and the longer-term economic impact of the storms should be negligible. Although the labor market continued to show decent growth in recent months, consumers’ ability to lead economic expansion is likely to come to an end in the face of weakening salary income growth. Finally, the future path of short-term rates could add some possible volatility to the financial markets.
For additional commentary from NorthCoast's CIO Patrick Jamin on the third quarter, click here.
|November 1, 2015||
NorthCoast launches U.S. sector rotation strategy using ETFs.
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