|June 29, 2018||
What appeals to you about U.S. large-cap equities (IVV) heading into the second-half of the year?
The U.S. economy is still fundamentally strong with job growth accelerating since September 2017 and unemployment rates reaching new lows. Wage growth, as measured by the employment cost index for private wages, has also been rising which is generally consistent with the tightening labor market and a narrowing in the unemployment rate gap. Manufacturing has become one of the stronger components of the U.S. economy with almost all of the regional economies picking up steam in recent months. As a result of this positive economic data our market timing model shows a slightly more bullish outlook for the U.S. equity market compared with the first quarter’s outlook.
Sentiment remains optimistic as the U.S. consumer is feeling more upbeat about its current financial situation. However, the Trump administration’s formal announcement of additional tariffs on Chinese imports has raised concerns about trade tension between the two largest economies in the world. These tariffs could increase uncertainty and weigh heavily on financial market conditions and the collective sentiment.
|January 3, 2018||
What drove the additional allocation to U.S. equities in the global growth portfolios and how do you like the asset class heading into 2018?
We increased exposure to IVV (iShares Core S&P 500 ETF) as 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 4, 2017||
What led to the trimming of United Kingdom equities (EWU)?
Our model showed relatively weaker valuation, technical and sentiment indicators for EWU. UK’s economic leading indicator was not as optimistic as the Eurozone or other regions and countries. Economists forecasted U.K.’s GDP projection for the year to be 1.6%, down from 1.8% last year.
The industrial sector, which continued to expand but failed to recoup losses from earlier in the year, was another negative signal. This confirms our view that factory growth will fail to offset 2017’s consumer-led slowdown in the service sector despite the pound’s sharp depreciation. We are also cautious about the long-term outlook of UK’s economy and equity market.
The fallout from departing the EU may have ripple effects on the economy and too many questions still remain before a clear picture of the post-Brexit U.K. emerges.
To view more comments, check out a recent article published in the Investor's Business Daily, click here.
|September 20, 2017||
Global Select, International Select, International Select Hedged and Emerging Market Select are the newest offerings by NorthCoast and the firm is excited about the opportunity and timing. Click here to learn more.
To ensure future delivery of email, please add [email protected] to your address book, contacts, or safe sender list.