|
August 11, 2010
Investing in a Quasi-Recession
Despite the hoopla about the summer
market rally, we continue to see a market
that is basically without a trend. Bonds
have generally outperformed stocks over the
past six to nine months, and the momentum
has come out of a broad array of indicators
that we rely on for managing portfolios. In
fact, our interpretation of the array of
data we review has become more bullish for
bond investors and less bullish for stock
investors since our latest quarterly report. Read more:
Adobe
June 28, 2010
On the Road to Recovery? Or Relapse?
Many who watch markets today draw
comparisons to the early 1930s and conclude
that the end of robust, global,
Keynesian-style stimulus might drive today’s
economy right back into the ditch. For those
of us who have been concerned about the
potential for a rapidly growing government
to dampen the “animal spirits” of private
enterprise, we are not entirely convinced
that some restraint doesn’t come without its
benefits as well. Read more:
Adobe
May 17, 2010
Our Take on Europe's Troubles
What do troubles in the Euro-zone mean
to U.S. investors? The answer is relatively
simple. Growth rate expectations will likely
be cut, dollar translation will have a
negative impact on U.S. company profits, and
dollar strength will make U.S. exports more
expensive to Europeans. While there
are near-term challenges for the European
community, and the global growth story,
there may be a silver lining in this for the
United States, vis-à-vis the dollar and the
U.S. recovery story.
Read more:
Adobe
|
HTML
March 1, 2010
A Cautionary Tale
There is concern that after a
stimulus-induced recovery in GDP and
corporate profits the domestic economy is
slipping into a sub-par growth rate that
provides neither job creation nor further
material gains in profitability. How can
this be, given the fact that nearly $11
trillion in government commitments
(guarantees, loans, and investments) have
been put in place? Could it be that too much
of the monetary and fiscal pump-priming was
squandered? Read more:
Adobe
|
HTML
January 11, 2010
The Road Ahead
Global equity markets have recovered
about half their losses since 2007 amid
signs of slowdown in layoffs and improvement
in earnings, as forecast by most analysts.
However, most ordinary people have a
different assessment of the economic
environment. So while we welcomed
improvement in financial markets in 2009, we
do not see the economy as out of the woods. Read more:
Adobe
|
HTML
December 14, 2009
Bernanke's Prayer
Deflation has long been a concern of
central bankers. After a period of
falling prices, markets are pricing in a
return to inflation. Our observations
on credit and the economy confirm this
expectation. However, quarterly data
from the Federal Reserve shows that U.S.
private sector borrowing is contracting at a
$2.3 trillion rate. This trend is a
significant risk to the outlook that needs
to be monitored. Read more:
Adobe
|
HTML
August 24, 2009
Trough Earnings and the Path Forward
How Earnings Recovery May Be Different This
Time
We believe that S&P 500 earnings have
reached a trough and that recovery in
earnings, led by cost reductions, is real
and underway. Our most likely scenario
calls for earnings to return to $65 by 2011
from the $40-45 in trailing-12 month
earnings that are likely to be posted by the
S&P 500 companies this quarter. We are
marking this quarter as the trough point in
that data series. Tactical asset
allocations have been returned to “neutral”
positions in response to improvements in our
various indicators on credit, the domestic
economy, and trade. Read more:
Adobe
|
HTML
June 4, 2009
Signs of Improvement
Broadening Out Portfolios & Raising Equity
Exposure
Since our last commentary, we have seen
signs of improvement in a variety of
economic indicators. We still have
concerns about what the quality of the
recovery will ultimately be, but believe it
is appropriate to add some exposure to
equities and broaden out portfolios to
include foreign assets and corporate bonds,
given recent improvement in our indices. Read more:
Adobe
|
HTML
March 13, 2009
A Big Hit to Wealth and What to Do Now?
The magnitude of losses in equity
markets have driven equity markets deep into
what technicians would call “oversold”
territory. The S&P 500, which used to trade
at 2.4 times revenue in March 2000 now
trades at 0.75 times revenue. At this level,
our equity market has arguably reached a
valuation level more typical of what the
Japanese stock market has seen over the past
decade. Read more:
Adobe
|
HTML
March 5, 2009
A Questionable Plan and a Free Market Silver
Lining?
The new stimulus plan is designed to
replace the loss of private sector spending
as that sector attempts to reduce debt and
increase savings in response to excess
mortgage debt, falling asset prices, and the
nearing of retirement for the largest
segment of the population. It also puts the
government in the role of “borrower and
spender of last resort” to complement the
actions taken by the Treasury and the Fed to
stabilize the money supply. According to The
Wall Street Journal, the plan amounts to
$1.4 trillion of new taxes, $5 trillion in
additional debt, and $1 trillion in new
entitlements, on top of the $9 trillion of
combined “rescue efforts” already put in
place through previous stimulus, loans, and
guarantees. Read more:
Adobe
|
HTML
January 7, 2009
Can Policymakers Create Just a Little
Inflation?
In our last commentary, we pointed to
the ongoing slide in net new credit creation
by households (the largest component of the
private sector in the United States) as a
historic event that signaled a dramatic
change in the country's financial inner
workings. This raises two important
questions. First, can government spending
spur a sustainable recovery in the absence
of private sector borrowing and spending?
Second, will the Federal Reserve and the
U.S. government be able to stimulate
risk-taking as households, corporations, and
investors seek to reduce leverage? The
answer to these two questions will largely
determine what kind of year 2009 turns out
to be. Read more:
Adobe
|
HTML
December 12, 2008
Household Credit Turns Negative...
A quick look at the remarkable decline
in consumer demand for money and credit
through the lens of the Federal Reserve's
Flow of Funds Data released today. The
data shows the first decline in household
net new borrowing on record. This
suggests the monetary transmission mechanism
behind the Fed's stimulative monetary policy
efforts is not functioning well given
de-leveraging efforts. Read
more:
Adobe
|
HTML
November 21, 2008
Credit: Can't Get It... Don't Want
It...
Action steps for the current market
environment, and a thoughtful discussion
about how this downturn differs from a
traditional recession. The anatomy of
the downturn is examined along with thoughts
about how a bull market might eventually
take hold. Read more:
Adobe
|
HTML
September 24, 2008
Downgrading Outlook Based on Credit Freeze
New data on credit suggests potential
for systemic weakness that could inhibit
recovery. Raising more cash in
portfolios and introducing WCA Credit
Thermometer Index. Read more:
Adobe
|
HTML
September 15, 2008
Joseph V. Battipaglia
Conference Call Replay on Market Conditions
Listen (Requires Adobe Flash Player 9)
September 15, 2008
Equity Markets Stumble on Lehman, Merrill,
and AIG:
Implications for Strategy
Last weekend's historic events restructure
Wall Street, in this commentary we review
where we are and implications for portfolio
strategy. Read more:
Adobe
|
HTML
September 9, 2008
No Change in Portfolio Strategy Despite
Treasury GSE Action
GSE action suggests major long-run changes,
but offers little to improve the current
recessionary conditions facing economy.
Read more:
Adobe
|
HTML
July 31, 2008
Quick Take on GDP Report
An analysis of the economy's performance as
seen in the GDP report. Read
more:
Adobe
|
HTML
July 21, 2008
Valuations Are Better, But Markets Are
Not Out of the Woods
A look at market performance during profit
contractions. Read more:
Adobe
|
HTML
May 20, 2008
Buy the Dips
Examining the bullish case for equities.
Read more:
Adobe
|
HTML
March 10, 2008
Investing During Recession
Portfolio strategies for investing during
recession. Read more:
Adobe
|
HTML
January 21, 2008
Global Sell-off
Market volatility and its implications for
portfolios.
Read more:
Adobe
|
HTML
December 27, 2007
Guarded Posture... For Now...
Profit and growth expectations remain too
high, but price corrections should
create opportunities in 2008.
Read more:
Adobe
|
HTML
December 7, 2007
NBER President Raises Recession Concerns
Given all the discussion about the
"Goldilocks Economy," we evaluate the
economy's health from the point of view of the NBER's
Recession Dating Committee.
Read more:
Adobe
| HTML
November 28, 2007
Equity Risk Heightened - Asset Allocation
Remains Defensive
With risk rising, we identify five key
aspects of the economy to focus on for
signs of improvement.
Read more:
Adobe
|
HTML
September 25, 2007
After the Rate Cut
The Fed's first rate cut coincides with a
turning point for the economy. The critical
issue is not what the Federal Reserve does
with rates but how the economy responds in
turn. We lay out three possible
scenarios for the way forward.
Read more:
Adobe
July 30, 2007
The Case for Growth
We see the seven-year value cycle as now
over. Instead, we are focusing our
portfolio recommendations on growth.
Read more:
Adobe
June 15, 2007
Data Affirms Tactical Asset Allocation
Posture
We believe some markets are mis-pricing
risk. Additionally, new data from the
second-quarter Flow of Funds Report
shows a very sharp falloff in net new
borrowing by households; slippage in
economy-wide profits; and an accelerating
trend toward substituting corporate debt for
equity.
Read more:
Adobe
March 19, 2007
Cutting
Earnings and Equity Target
Recent data shows some slippage in credit
creation at the household level. We raise our recession expectation to 50%
from 33% and, as a result, lower our S&P 500
year-end price target to 1,430.
Read more:
Adobe
Market Updates and Dial-In Conference
Calls. Periodically, we host
dial-in conference calls to update you on
WCA and markets. If you would like to
be notified when these calls take place and
would like to participate in them, please
e-mail us at
info@washingtoncrossingadvisors.com
Please feel free to explore our web site and
read our commentaries, program descriptions,
and program media. You may also sign
up to receive our commentary whenever we
publish, free of charge!
|
