Economic Outlook

Economy Stronger, Even If Boosted By Weather

The crowd continues to gather around an improved growth outlook, an uncanny replay of the last two springs. The U.S. is increasingly being viewed as a locomotive of global growth, as emerging nations slow, Europe lies in recession and its risk of financial shock stubbornly lurks (even if temporarily tamed). U.S. inflation has rolled over convincingly and seems headed toward the 1.5% range.

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Equity Portfolios

U.S. Stocks Stellar In First Quarter, Again

Our work continues to place U.S. stocks in the top ranks vs. other asset classes. Within stocks, large-cap U.S. equities continue to look the most attractive relative to many alternatives, as profits and profit growth are OK and valuations remain most attractive. However, S&P-based projections have moderated and fourth-quarter earnings saw a drop from the previous quarter. Mid caps and small caps are less attractive as we anticipate P/E contraction.

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Fixed Income Portfolios

Monitoring The Fed’s Punch Bowl

In an economy that’s gradually gaining ground, we see a Federal Reserve that’s committed to fostering economic growth yet remains prepared to fight excessive inflation should it arise. How our elected officials handle the growing government budget deficit will be very important as investors from around the world decide where to invest their capital. In the meantime, we’re managing fixed-income assets with the expectation that inflation will continue to be positive (avoiding debilitating deflation) albeit moderate, and weighing portfolios toward higher-income and capital-gains opportunities.

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