January 10, 2011
First Quarter Asset Allocation Report
This report discusses current recommended allocations in light of evolving fundamental conditions. We lay out expectations for the economy and various themes that we think will exist over our forecast horizon. The report also includes an update on the WCA Fundamental Conditions Index along with recommended portfolio allocations for different investor types.

December 21, 2011
2012 Outlook
Months of slippage in fundamental data have left investors concerned about the outlook. Although Europe’s troubles grabbed the headlines, the process of household balance sheet repair continued in 2011 and remains the single most important thematic as we head into the new year.

December 6, 2011
Banks Boost Liquidity As United States Growth Accelerates
Last week's addition of central bank liquidity has eased financial uncertainty, but this liquidity is temporary in nature. We continue to see better fundamental data trends in the United States evidenced by recent employment and other survey measures of activity. Although valuations seem to favor equities, uncertainty about fundamentals needs to show continued improvement.

November 29, 2011
Europe: After the Honeymoon
Recent crisis in Europe puts the European Union to the test. This commentary explores the issues of union in the context of the crisis. Also, we notice the U.S. economy continues to fair reasonably well. Portfolio posture remains cautious as we await a measurable sign of improvement in fundamental conditions.

October 8, 2011
Fourth Quarter Asset Allocation Report
Despite the confidence shock from August and September's market drama, the U.S. economy performed reasonably well, judging by recent data. Risk has been pared back beginning last spring, and model portfolios are tilted more toward bonds within strategic ranges. We are watching for signs of stabilization in fundamental conditions before returning portfolios to a more fully invested “neutral” posture with greater equity exposure.

October 5, 2011
Forbes Interview With Kevin Caron
Healthcare and Consumer Staples offer investors opportunities. A conversation with portfolio manager and market strategist, Kevin Caron.

September 26, 2011
Bold Action Needed Now
The choice now facing policymakers is between gradual or bold action in light of the weaker economy and more fragile markets. Restoring faith in Europe's financial system and avoiding deflation must be job number one.

August 24, 2011
Are Markets Signaling Another Recession?
While a recession would mean lower stock prices, a longer view reminds us that tough times also create opportunity. Stock holdings should be viewed as part of an overall mix of personal assets. A balanced approach allows for smart risk-taking.

August 5, 2011
Stocks See 10% Correction and Bonds Rally on Global Debt Concern
Major U.S. stock market averages have corrected by greater than 10% from highs reached in May. Intensifying concern about potential default by some European countries, an unsettling debate over the funding of the U.S. deficit, and generally disappointing economic data has provided little reason for investors to bid up stock prices.  This weeks commentary discusses the week that was and discuss how investors should respond to recent volatility.

July 11, 2011
Third Quarter Asset Allocation Report
Beginning in May, portfolios were allocated closer to the middle of prescribed ranges for stock and bond exposure as data showed signs of slowing. Bond allocations were modestly raised, defensive sectors were added, and domestic large-cap value was re-introduced into portfolios. Greek and European debt issues have been the focus of investor attention in recent weeks. Although we have no direct equity exposure to Greece, Ireland, Spain, or Portugal, we discuss the potential for Europe to find a "fix" to a difficult set of issues.

June 8, 2011
A Pause in Growth?
The pace of economic recovery has slowed based on our analysis of incoming data. The WCA Fundamental Conditions Index™, which evaluates changes in thirty different measures of financial and economic conditions, has slipped to a current reading near 65 from above 80 earlier this year (chart below). So long as this downward trend persists, a tactical portfolio posture with a somewhat broader diversification and closer to a neutral “risk / return” posture is appropriate. The shift was accomplished primarily through a modest increase in bond allocations beginning in May.

May 17, 2011
The Much Anticipated End Of QE2
Since the Federal Reserve began its large-scale asset purchase program last fall, there has been a widespread and sustained improvement in most of the indicators we monitor. It is difficult to say exactly how much the program contributed to the improvement, but there is at least a coincident relationship between the Fed’s purchase of assets and the overall movement of much of the data in recent months. Importantly, aggregate profits have continued to increase, which is a positive indicator for future investment.

March 3, 2011
Commentary on Trends
If oil  prices remain elevated for an extended period of time, it will then affect fundamentals, and we would expect to see that manifest across a wide variety of inputs to our investment process.  However, at this time the pulse of the recovery still appears strong.  At this time, a far greater proportion of observations on markets and the economy are leaning toward recovery than contraction.  Nonetheless, we continue to closely monitor unfolding events in the Middle East.

February 10, 2011
Two Key Questions
There are two questions that must be asked when making the tactical choice between stocks and bonds.  This commentary focuses on what those questions are, how we attempt to answer them, and what it means for allocating assets between stocks and bonds.  We also introduce the WCA Fear-Greed Index and discuss its use in tactical asset allocation.

December 2, 2010
Improvement in WCA Composite Conditions Index
Index Back Above 50 / Downward Trend Broken
Early this year, we saw our WCA Composite Conditions Index peak near 90 and begin a slide that lasted into the fall.  That slide appears to have been arrested due to a combination of improving fundamentals and enhanced risk appetite in credit and capital markets.  This week saw an improvement above 50, and we have increased equity exposure via emerging markets in our tactical models.

November 15, 2010
The Fed’s Monetary Policy Sequel:
Why QE2 May Not Live Up to the Hype
Equity markets have enjoyed a spirited rally since late August when the Federal Reserve announced further actions to stimulate growth via a new round of asset purchases euphemistically dubbed Quantitative Easing II (QE II).  By our math, it seems that markets have already discounted more asset purchases than are likely, especially given some of the discord that seems to be following the announcement.  In this commentary, we explore some of the potential pitfalls that may follow from QE II, and why this round of easing is not the same as the first round of easing during the heat of the recent financial crisis.

September 16, 2010
The Bright Side of Purgatory
Where we last left off in our August commentary, the Dow was at 10,644. Since then, the index fell to 10,000 and has bounced back to nearly 10,600. In other words, the equity market continues to churn and mark time as it contends with the challenges at hand – namely the ongoing liquidation of private sector debt, periodic concerns about sovereign finances, and large amounts of excess slack in the global economy. Especially hard hit has been America’s private sector workforce. All of this has conspired to produce a sub-par recovery that, in some ways, seems a lot like purgatory.

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.

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.

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. 

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?

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.

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.

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.

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.

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.  

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.  

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.  

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.  

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.  

September 15, 2008
Equity Markets Stumble on Lehman, Merrill, & 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.  

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.  

July 31, 2008
Quick Take on GDP Report 
An analysis of the economy's performance as seen in the GDP report.  

July 21, 2008
Valuations Are Better, but Markets Are Not Out of the Woods 
A look at market performance during profit contractions.  

March 10, 2008
Investing During Recession 
Portfolio strategies for investing during recession.  

January 21, 2008
Global Sell-off 
Market volatility and its implications for portfolios.  

December 27, 2007
Guarded Posture... For Now... 
Profit and growth expectations remain too high, but price corrections should create opportunities in 2008.  

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.

November 28, 2007
Equity Risk Heightenes
Asset Allocation Remains Defensive 
With risk rising, we identify five key aspects of the economy to focus on for signs of improvement.  

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.

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.  

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.

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.

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Quarterly Reports:

First Quarter, 2012
Fourth Quarter, 2011
Third Quarter, 2011
Second Quarter, 2011
First Quarter, 2011
Fourth Quarter, 2010
Third Quarter, 2010
Second Quarter, 2010
First Quarter, 2010
Fourth Quarter, 2009
Third Quarter, 2009