Perspectives Blog

A tepid cyclical lift

Tom West, Director of Equity Research | April 28, 2014

Cyclical investment and discretionary spending are on track to deliver earnings growth of 7% in the S&P 500. Strength in some consumer durables appears more of a “wallet share” gain than a general lift due to recovering wages or a release of excess savings. Construction and energy are poised for another year of growth, while “enterprise” spending and investment in the tech sector remain challenged. The S&P 500 Index should grow earning…

What’s behind the weakness in U.S. housing?

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | March 24, 2014

…er will improve, the latter conditions will not. There is some evidence of a two-tiered market as well, with most of the slowing seen in the single-family sector against a firmer multi-family segment, particularly in new home construction. Over the last year there has been a marked slowing in single-family permits and single-family starts across all regions, not just those areas suffering through a miserable winter. The reduced pace of constructi…

Snow job!

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | January 13, 2014

…, but the majority came from retail (+55k) and temp help (+40k), areas noted for low wages. Outside of these two sectors, payroll counts were weaker across a broad number of industries—either smaller gains or outright losses. Construction shed 16k jobs while information/telecom shed 12k. Professional and business services added only 19k, despite the strong rise in temp hiring, due to a 25k decline in accounting and bookkeeping services. The publi…

Rebalancing the U.S. economy

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | January 13, 2014

…e capital, not return it to shareholders in the form of dividends. This capital deepening can begin to close the output gap and is probably what the markets are counting on. We are beginning to see some lift in private sector construction spending on offices, commercial space and manufacturing plants (see chart 2). Private sector construction Source: Census Bureau, November 2013   Consumers (70% of growth) appear a bit hamstrung. Spending h…

Steady as she goes

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | April 7, 2014

…ay have been due to weather, but I would point to payback from the inventory swing. Gains were at or slightly above trend in professional/business services with about half from temporary jobs. Solid gains were seen in retail, construction, and healthcare. Leisure and hospitality was a little light, with restaurant hiring strong—indicative of a pickup in part-time jobs. Public sector continues to be a drag with cuts at both federal and state &…

Income inequality, disinflation and profit growth – the role of globalization

March 10, 2014

…he latter. So, for example, Apple reaps the majority of the profits from iPhone sales even though China has a virtual monopoly on the assembly and export of iPhones, together with the bulk of the low wage jobs attached to its construction*. And so when we look at profitability trends in U.S. national accounts data, we can see that while domestic non-financial profits are around 7.3% of gross domestic product (GDP) — around 1.6% above their long-t…

The case for active muni management

Kimberly Campbell, Senior Portfolio Manager | April 21, 2014

…stment process has withstood the test of different market cycles. In stark contrast to a passive approach, an active investment manager will consider the overall investment and political environment when determining portfolio construction and strategy. Active managers define their strategy by managing the fund’s exposures, or “risk budget,” through the fund’s internal attributes such as yield curve positioning, issuer selection, quality, sector,…