Friday, December 15, 2017

This Week's Message: December Trends

Keeping it short and sweet this week (as we prepare Part 2 of our year-end letter [link to part 1]), below are the titles to what we've stuffed into our December '17 trends file thus far.

Bottom line: The global economy presently looks good, U.S. inflation -- while the Fed doesn't (per the December meeting commentary this week) seem to entirely agree -- is clearly brewing, China's debt picture is at the margin improving slightly, the Federal government is collecting a lot of tax money, however, it's spending much more than it's receiving (what else is new?), the Dow's recent results are heavily skewed by Boeing, and the recent rally in transportation stocks suggests good things about the go-forward probabilities for U.S. equities. 

Sunday, December 10, 2017

2017 Year-End Client Letter, Part 1: What Makes Us Tick

2017 has been quite the year for the stock market! Predictions annihilated, records smashed, and headwinds bucked like they were never there. My, where to begin?

Of course we'll do the obligatory roundup of returns, show off our economic indicators, tell you what sectors we like and don't like going forward, and see how our opinions of a year ago played out (all in parts 2 and 3). But how do we get it all started in a way that'll inspire you to remain engaged throughout this year's yarn?

Well, if we were on your end of this letter, and you managed our money, we'd want to know what makes you tick. We'd want to know how you view the world, the markets, and how you approach the business of investing our money. Therefore, we'll devote Part 1 to a brief synopsis of how we do/see things here at PWA.

Friday, December 8, 2017

Goldilocks Consumer

The University of Michigan just released its preliminary December read on U.S. consumer sentiment (an input to the consumer sentiment component of our macro model). The headline number, while plenty high (96.8), came in at the lower end of economists' estimates. 
  • Forecast range 96.5 to 102.0 from 57 estimates...

Wednesday, December 6, 2017

Aha! Well, maybe... maybe not..

While, for three+ decades, I've been preaching to investors that financial markets are the definition of uncertain, that they should never take anything for granted, and that they are to shun all gurus like the plague, there are still moments where I find myself scratching my head when the market doesn't move like I might've guessed.

The past few days would be an example.

Tuesday, December 5, 2017

This Week's Message: Does It Really Matter How Companies "Spend" Their Tax Savings?

The following is me thinking via my keyboard about an article I just read.

A senator from New York is leveraging Bank of America's plan to add another $5 billion on top of a previously announced $12 billion share buyback campaign to argue that 
"big corporations can smell the huge tax cut they have coming, and rather than raising workers' pay or hiring new workers, they're buying back stock and prepping huge dividend payments," 

Chart of the Day: Piling Into Financials

As we've been reporting for some time herein, we like the setup for financial stocks (presently tied with industrials for our highest target weighting). Therefore, XLF (the largest, and most liquid, financial sector ETF) is a prominent holding in most of our client portfolios.

Apparently, the market is beginning to warm up to our thesis:

Saturday, December 2, 2017

Bonus Chart of the Day: Global Economy Better Than Expected

We've been expressing herein often of late (here and here for example) our view that the global economic setup looks quite good. The below (again from Bespoke) suggests that it's even better than economists expected:    click to enlarge

Chart Of the Day: New Home Sales

If you're thinking that the housing market, by way of rising prices, is revisiting its bubbly condition of the mid-2000s, well, you're fretting over our last economic battle. I don't suspect that the housing/mortgage market/s will be the catalyst for the next.

Friday, December 1, 2017

Tax Reform and Its Economic Implications

Posted this early this morning, before the revelation regarding Michael Flynn's pending testimony regarding the President and Russia -- which has the market selling off notably (relative to the lack of volatility the market's experienced this year). Of course there'll be commentary coming your way as dusts settle. 

In the meantime, a little something to ponder: While, clearly, traders are reacting to the potential for political uncertainty to come, we have to acknowledge that the world has been rife with political uncertainty throughout 2017. Of course this feels different/dramatic, but, in the end, will it actually culminate in political certainty? Well, it ultimately has to, one way or another. And, in the end, the market likes certainty. We'll keep you posted....

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We've been reluctant, here on the blog, to weigh in much on tax reform and its market implications. Mainly because, up until very recently, the likelihood of either plan passing -- in the forms presented -- was nil, as neither would wash given the "Byrd Bath" rule (has to be revenue neutral in 10 years to allow for a simple majority vote). Now, apparently, it looks as though the ultimate plan will somehow wash, and, thus, we're on the cusp of tax reform becoming reality.