US Economic Outlook 24Q4

Monetary policy is ostensibly slowing the economy, yet growth continues unabated. The impact of monetary policy occurs with a lag, one the consumer will feel shortly.

Politics is initiating a trade war while heightening economic uncertainty. Either of these would conspire with monetary policy to deliver lower growth. Combined, they may deliver stagflation or worse. There is a price for greatness.

US Economic Outlook 24Q2

The Fed’s dual mandate of full employment and moderate inflation ensures conflict at turning points. The challenge for the Fed is finding the balance to ensure the long-sought “soft landing” of the economy. The prudent path is policy moderation.

US Economic Outlook 21Q3
America’s bifurcated economy faces a long-dormant specter, inflation. The root cause is a jump in good demand induced by Pandemic policies. Reversal of the policies will deflate demand and inflation as businesses adapt.

Global Portfolio Strategy 21Q3
Reopening the global economy brings inflation pressures as supply chains lag, accelerating demand. While investors rightly fret about inflation, the greater risk may lie with China’s real estate bubble. The unraveling of a credit bubble can bring a debt-deflation spiral that counters the narrative of the moment, inflation. Investors are now beholden to the Federal Reserve’s monetary policy exit and China’s ability to deflate their debt bubble.

Global Equity Markets: 2021Q3
U.S. value investors endured underperformance for two decades. Values acolytes continue to preach patience and resolve to their detriment. Value investing is alive and well outside of the U.S. Following the global trade patterns for goods for its location is a well-rewarded endeavor.

US Economic Outlook 2021Q1
Fiscal and monetary stimulus is brewing a magnanimous concoction to lift the economy. While the stimulus ingredients are similar globally, the paths are diverging. The result is a multi-speed global recovery that reduces the variability of global growth. The greater challenge is diminished growth in the long-term as tax increases and debt service crowd out other fiscal programs.

US Economic Outlook 2021Q2
Fiscal and monetary stimulus ignited the durable goods and housing markets in a frenzy of activity. It will not endure without further stimulus and result in slower growth in the next year as purchases brought forward are not replaced. This highwire act will require balanced policy responses as the next steps. The risks to housing prices and of deflation are material.

Global Portfolio Strategy 2021Q2
The challenge for financial markets is that unprecedented monetary and fiscal stimulus delivered high valuations in most asset classes, while supply demand imbalance delivers higher inflation. The latter is temporary, while the former more enduring. In this environment, timing is everything. Now is the moment for active investing to add value.

America can see the light at the end of the tunnel. The challenge is that not all the world is as fortunate as America in their access to a vaccine, nor do they have a substantial population that developed antibodies after contracting the virus. This situation ensures that the global recovery may not parallel the American experience.

Global Portfolio Strategy 2021Q1
Easy credit and exciting new technologies compel the investor while sage investors remember past bubbles and speak of prudent valuations. The tune is tactical investing. The question is whether to dance or sit it out.

US Economic Outlook 2020Q4
A boom year will follow the devastating prior year with the leisure sector the primary driver. The summer travel season may be the best on record and lift the economy. Everything has a cost. Higher taxes and debt service in the future suggest targeted fiscal policy.

Global Portfolio Strategy 2020Q4
Valuation levels suggest the continued primacy of equities is doubtful, particularly for US technology. The quandary is that valuation gaps can endure for years. The primacy of sentiment makes it a year of tactical investing. Timing is everything.

The practicality of risk parity enables an asset allocation paradigm with risk management at its core. The transparency and liquidity empower a timely transition from the current state to a risk-focused future. Risk parity invests without compromise.

Secular trends are conspiring with the Pandemic to reduce demand in the US. A newfound thrift by consumers from the Pandemic would further slow growth and is unnecessary. Policy action is required to avoid a decade’s long impairment of consumption. Best pay now, rather than a higher bill later.

It is the best of times for equities. It is the worst of times for employment and interest rates. The earnings season arrives with its insight into the durability of business during the Pandemic. Volatility may reign across markets. For the prepared, risk will offer opportunity.

The key to successful long-term investing is managing risk. The hedge fund investment process is long, arduous, and requires experienced professionals using sophisticated analytical tools to ensure value to the portfolio. Liquid alternatives overcome these barriers for the investor.

Interest rates in the US are at levels never seen before. Before the Pandemic, the expectation was that the increasing productivity of the Millennial generation would modestly lift real rates. Without an effective policy response, that outcome is doubtful and could repress real rates for decades. Investors are forewarned that this time is not different.

Monetary policy is solving one problem and creating another. A reversal of equities may not result in a corresponding increase in credit spreads due to Fed actions. Thus, an equity decline would impair assets with no similar reduction of liabilities. Sponsor beware.

During a period requiring leaders, the US had politicians. Instead of addressing the problem in front of them, their eyes are fixed on the next election and placating their adoring masses. The long-term effect may be a lost generation. The short-term outcome may be needless hardship for those industries that are primarily hit.

A bad opening foretells show cancellation. Australia and Hawaii reveal the threat of early openings even with near eradication of the virus. Leaders face an unequivocal dilemma: limiting travel outside your bubble and gathering inside with the consequential economic impact or accepting the increased deaths and concede the prior economic sacrifice was meaningless. Plaintive politicians know these alternatives are an atrocious trade.

Global problems require global solutions. The United States is a pariah for its inability to address the Pandemic. The investing implications are profound. Without election and virus certainty, volatility reigns as the malevolent monarch of the markets.

The first wave is just beginning, not ending. The good news is that the fatality rates appear lower than initially measured. The bad news is that the US reproduction rate’s current growth would return to the May 1st level by July 4th.

Value investors are asking themselves, will the promise of value investing return to prominence? The answer is multi-faceted. Indeed, value investors experienced under-performance versus the broader market and growth stocks for the last thirteen years.

Change is inevitable. The retail catastrophe occurring now highlights this statement.

The US expansion is long in the tooth. The investor needs only ask one question this year: how will
global growth continue?

The story of growth is productivity. Doing more with less. Before one can do more with less, one must learn.

The economic environment in the US has a stable consumer and supportive
fiscal policy, which should carry the US economy for the year with government
expenditures supporting. The question is whether investment will rebound or is the decade long expansion ending?

The economic environment in the US continues to show a stable consumer, rebounding investment, and supportive fiscal policy. The lone detractor from growth is the continuing drag from net exports, but this is merely an accounting identity.

The key to a successful defined benefit pension plan is managing risk. The pension plan is a significant employee benefit that supports retention and corporate culture in the long-term. The pension plan liability may represent a considerable proportion of the corporation's balance sheet and materially impact the income statement. Accounting for a defined benefit pension plan is notorious for its arcane regulations and the dual regimes of statutory and financial accounting. A few critical elements are crucial to managing the pension.

The yield curve and interest rate levels are difficult to forecast in aggregate or individually. Forecasting accuracy is improved when focusing on the factors that describe the term structure and augmenting the models with a market or economic variable.