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In The Here & Now – The Economy Proves Healthy

CAMS Weekly View from the Corner – Week ending 2/7/2020

February 10, 2020

With the month of February well underway last week we began to get a run of general economic releases coming in for the month of January.

As an overall observation the economy proved healthy – if not quite healthy with each passing release.  With this the stock market improved as the week went on building on the strength of the economic data.

There were some notable pieces of information worth sharing.

Specifically, we seen the Institute for Supply Management (ISM) release their monthly Purchasing Managers Surveys for both Manufacturing and Non-Manufacturing.  In the case of Manufacturing this Survey reflected the manufacturing sector has gone back into expansion mode while the Non-Manufacturing Survey reported accelerating activity.

These Surveys have street credibility with market participants in part because the actual Purchasing Managers are responsible for managing supply chains across the U.S. Manufacturing and Non-Manufacturing sectors.  They are on the front lines so-to-speak and have a vested interest to get their expectations right as they manage said process for their respective companies.

We also saw the employment report come in much stronger than expected with 225,000 new jobs being created in the month of January.  In addition to this, the Weekly Unemployment Insurance Claims continue to hold at a very low level of around 200,000 new claimants.  This continues its on-going multi-decade low levels which offer a sound employment backdrop in the United States.

That’s the Hear & Now

We have offered endlessly in these Weekly Views that our historically highly valued markets absolutely require on-going consistent economic growth to support them.  Prior to the run of the above economic releases the markets were getting evermore consumed with the forward looking concerns of the general economic picture in light of the unknown around the Coronavirus.

Interestingly, while the current economic releases point to a sound economic backdrop the Coronavirus has continued to get worse relative to the number of official cases as well as deaths.


The above is an excellent site for the Official Reported cases and deaths by country.  This is published by Johns Hopkins.

The U.S. cases have grown but remain very low at an overall number of 12.  The U.S. has no reported deaths at this time.  By contrast, per the above, there are 37,592 cases reported currently with 814 deaths.

As for market participants the question as this juncture is will they continue to brush off the coronavirus concerns they had just one week ago?  When it comes to collective fear in markets it is not possible to accurately project.

We can monitor fear levels as we shared last week.  So we continue to do so and at this point-in-time, with the strong economic releases shared above, fear has notably subsided in markets.

For our part we will continue to watch the above data to see how this Virus progresses and the market reaction – or lack of – to help gauge the significance of it through the eyes of collective participants.  If markets continue to look past this Virus via reduced fear levels it will be a collective statement that markets do not see a notable economic decline coming in light of the Coronavirus.

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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