Vital Signs OK, But Patient A Tad Weaker
The U.S. economy has shown signs of fatigue in recent months.
On the positive side of the ledger, housing remains quite strong. Consumer spending – representing over two-thirds of the economy – is also OK, even as U.S. households have become awfully responsible in this cycle, increasing their savings rate and growing spending only moderately.Download PDF
In Like A Lion, Out Like A...Lion
This year started with a roar – of pain. Markets came under heavy pressure on worries of collapsing oil prices, a sharp devaluation of the Chinese yuan, a tighter stance by the U.S. Fed, a too-strong dollar, and myriad other real and imagined risks. Investors quickly became despondent and markets wobbled.Download PDF
Fixed Income Portfolios
Bond Markets Reflect Future Growth Uncertainty
As the fixed-income market priced an economic recession with wide credit spreads, a flattening treasury yield curve and high default rate assumptions at the beginning of the year, the Fed came to the rescue again. In December 2015, after the first interest-rate hike, it hinted at four more interest-rate hikes in 2016. Earlier this year, however, the U.S. central bank signaled that two rate hikes for 2016 were more likely. Since then, equity and fixed income recouped the losses of early in the quarter. In hindsight, both equity and fixed-income markets may have overreacted to collapsing oil and commodity prices and fears of a “China hard landing.”Download PDF