Economic Outlook

Economy Doing Fine, With Even Jobs Gaining Ground

The markets have spent the better part of the last year worrying – about debt levels, risk, and financial structural issues that many felt doomed the U.S. to second-class status in the world leagues. But, through all the worry, the U.S. has generated very decent economic growth, fantastic productivity and corporate earnings growth, and is now adding jobs.

Sure, there are risks, and it’s premature to declare victory. This economy needs to prove it can sustain the removal of monetary and fiscal stimulus. But if we ignore for a moment the sensationalist labels – Great Recession, Depression, etc. – this economy so far seems to be recovering from a steep fall in not an atypical path. We think we will see more of that, save for a serious external shock.

Download PDF

Equity Portfolios

Market Still “Cheap” To Recent Earnings, Which Are Growing

Although many find it hard to understand, stocks continued to do well in the first quarter of the year. We feel that a decent economy in an environment of low inflation and interest rates forms a strong, fundamental foundation for good stock market performance. And investor nervousness can be a good thing – generally, it’s when everyone becomes convinced that stocks are an obvious buy that disappointment often follows and we at HCM get nervous.

Download PDF

Fixed Income Portfolios

Bond Market Still Doing Well

Gains in the bond market continued during the first quarter. The difference in yield (the spread) between the safety of U.S. Treasury bonds and more risky corporate, municipal and high-yield bonds fell further. This narrowing of the spread seemed to reflect investors’ belief that the economy is in recovery mode. And there appears to be a greater appetite for riskier assets even though lingering concerns remain about the ability of bond issuers to repay or refinance their debt.

Download PDF