CAMS Weekly View from the Corner – Week ending 6/1/2018
June 4, 2018
Back in February we took a look at a forward looking economic indicator known as the LEI for short. This stands for Leading Economic Indicator and is meant to gauge the economic outlook a few months into the future. The LEI is comprised of ten different forward looking measures and generally is effective at pointing to the expected trend of growth – be it positive or negative.
When we last looked at this measure it was pointing to continued economic strength and was proven correct as months ensued.
The current reading for the LEI continues with its on-going uptrend and with this offers an expected solid economic backdrop in upcoming months.
The above chart is published by the Conference Board and depicts the Leading Index via the blue line. The red line is the Coincident Index which offers the state of our current economic strength. As market participants we are far more focused on the forward view being stocks are bid up (or down) with forward expectations as the focal point.
This growth in trend depicted by the blue line is precisely what we need to see to support our highly valued markets. Without solid economic growth giving a general backdrop whereby companies can increase their sales and profits our historically highly valued markets will certainly be looking at notable downside issues.
Historically highly valued markets do not guarantee downside problems in-and-of-themselves but rather need a catalyst to underline that these levels have reached truly overvalued levels. Weakening economic growth that leads to flat lined growth is such a catalyst that nearly assures significant issues. At this time we are not in that environment which leaves us with a positive checkmark on that front.
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.
Comments