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Daily Blog

Friday, February 15, 2019

According to the National Retail Federation, Valentine’s Day will add $20.7 billion of consumer spending to the U.S. economy in 2019. It looks like the economy is going to need it. Consumer spending drives 2/3 of the U.S. economy represented monthly by retail sales which has been a bright spot and with expectations for a positive December its drop of 1.2% was heartbreaking. To put in context, this -1.2% decline was the worst decline since September 2009, renewing economic worries. Although the reporting period was pre-government shutdown, it was amid a month of violent market swings which may have contributed to the consumers’ reluctance to spend. Fourth quarter U.S. GDP will not be released until February 28. It is expected to confirm a fourth quarter slowdown but is estimated to exhibit solid growth of about 2.7%. Meanwhile, the Eurozone’s GDP continued to disappoint, expanding only a mere .2% in Q4 and although China’s January trade data was much better than expected, it is not yet indicative of a sustained economic pick-up. As Q4 2018 earnings season winds down, economic data and the possibility of a U.S./China trade deal will remain front and center for investors.

Please review retail sales on page 12 of the Global Perspectives book.

Weekly Commentary & Statistics

Monday, February 11, 2019

A fairly uneventful week ended with slight gains. U.S. economic resilience and the Federal Reserve’s recent pivot on its expected path of interest rate hikes were supportive of equities.

Monthly Commentary & Outlook

December 2018

In 2019 we expect, and prudent investors should prepare for, “the storm before the calm” — tighter monetary conditions, uncertainty that includes a “disorderly Brexit” and increasing tensions between China and the United States on multiple fronts. We expect a storm though, nothing more.

  • Exceptionally strong economic growth has prompted the Fed to raise interest rates, reduce the balance sheet and generally to “Rip the Bandaid Off” from a zero rate environment.
  • The subsequent surge in volatility is cleaning house from rampant speculation that needed to be unwound - setting the stage for a healthier and calmer market in the future.
  • Two of the “Big 3” — China and the Eurozone — are struggling for geopolitical reasons but also due to the U.S. regaining its ranking as the most competitive country in the world.
  • Investors should prepare for the “storm” of tighter monetary conditions and greater geopolitical uncertainty but not at the expense of losing sight of our forecasted “calm” outlook.
  • Diversify, be disciplined and do not forget your ABCs — which in our 2019 forecast extend all the way to J-Jobs.

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