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And The Beat Goes On…

CAMS Weekly View from the Corner – Week ending 4/26/2019

April 29, 2019

This past Friday the Bureau of Economic Analysis released the U.S. Gross Domestic Product (GDP) results for the 1st quarter of 2019.  Harking back to said quarter it is worth mentioning that was a period whereby market participants became confident that the U.S. economy was not heading into a notable downturn after a collective scare in the previous quarter that it was.  Per the data, they were correct.

There are several ways to look at GDP to help get a better sense of what it is offering about the economy at large.  One way is to look at GDP growth (or lack of) compared to year-ago levels.

This is consistent with how many look at their household income and/or business sales and profits in that we often observe how things look compared to the same time last year.

For the U.S. economy things are looking well – solid and consistent – just what highly valued markets need to help support them.


Click For Larger View:   https://fred.stlouisfed.org/graph/?g=nLiu

The above is a 10 year view of GDP growth with each bar representing the result compared to its year-ago level.

As the red arrow depicts we have been and continue to experience near clockwork consistency in the upward trending growth rate for the U.S. economy when viewed through this year-over-year comparison.

Going forward this is the type of experience our asset markets need to help support them.  Importantly, even with a solid economic backdrop markets can go extremely volatile with a mere concern that economic growth is waning.  We shared this in our previous edition by showing how the S&P 500 has experienced tremendous swings in the previous two years all while economic growth has been consistent.

With this no one should be surprised if we experience another volatility episode somewhere in 2019 as market participants continue to wrestle with historically high valuation levels.

Remove solid and consistent economic growth from the landscape and we will be inviting markets to show us how fast they can adjust valuations from historically high levels to historically reasonable levels.  For now, as displayed, the economic beat rides on.

I wish you well…

Ken Reinhart

Director, Market Research & Portfolio Analysis

Portfolio Manager, CAMS Spectrum Portfolio

Footnote:

H&UP’s is a quick summation of a rating system for SPX9 (abbreviation encompassing 9 Sectors of the S&P 500 with 107 sub-groups within those 9 sectors) that quickly references the percentage that is deemed healthy and higher (H&UP).  This comes from the proprietary “V-NN” ranking system that is composed of 4 ratings which are “V-H-N-or NN”.  A “V” or an “H” is a positive or constructive rank for said sector or sub-group within the sectors.

This commentary is presented only to provide perspectives on investment strategies and opportunities. The material contains opinions of the author, which are subject to markets change without notice. Statements concerning financial market trends are based on current market conditions which fluctuate. References to specific securities and issuers are for descriptive purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. There is no guarantee that any investment strategy will work under all market conditions. Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. PERFORMANCE IS NOT GUARANTEED AND LOSSES CAN OCCUR WITH ANY INVESTMENT STRATEGY.

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