Perspectives Blog

Defense industry outlook – Looking past the headlines

Ben Blomberg, Senior Equity Analyst | March 17, 2014

The outlook for U.S. defense contractors has been improving despite all the negative headlines. Army spending is under pressure, but Navy and Air Force spending remain well supported. The recent Ryan-Murray deal is a substantial positive, with a more predictable DoD outlook. Defense investors have had their share of bad news around the trajectory of defense spending, starting with the Budget Control Act of 2011, followed by the failure of the…

More light, less tunnel

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | October 31, 2013

After a data vacuum of almost three weeks, government agencies have started to gear up again with key reports; unfortunately, they present a picture of economic activity in the third quarter that ended on a soft note. While the third quarter is typically the weakest in a given year, the current trend in employment is disappointing. It appears the elusive turn in capital spending will await 2014 and then see only a modest build at some point nex…

How bad is China’s credit crisis?

Weili Jasmine Huang, Senior Portfolio Manager | February 3, 2014

…ssue ultimately requires fundamental change in the China financial system. While the government has announced and begun to implement some reforms, there will be no easy or immediate fix. Reform efforts to fundamentally adjust spending responsibility between central and local government (allowing private capital to invest in urban infrastructure construction, allowing bond issuance and setting up local government balance sheets to improve transpar…

The bean counting on second quarter GDP

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | July 25, 2013

Second quarter GDP data looks soft, including a wider trade deficit and cuts in government spending. Positive factors include steady consumer spending and upcoming changes in the way GDP will be calculated. Growth is poised to improve in the second half, but the Fed’s models and forecasts seem overly optimistic. Final second quarter GDP data reports are trickling in, putting the footprint of economic growth into focus. It looks soft, weighed d…

A tale of two labor markets

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | November 11, 2013

ates growth. We’ve seen inventory gains for three consecutive quarters—unusual for the second half of a business cycle. As a result, Q4 GDP will be a little lighter on this in combination with the shutdown drag. PCE (personal spending) was soft, up only 1.5%, and the smallest rise in two years. Unfortunately, business spending actually pulled back, the first decline in a year, as uncertainty is still restraining spending. Residential investment a…

The truth about April’s budget surplus

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | May 16, 2013

…refunds are down 3.5% this year versus last, with the average refund down 2%. This may be partly responsible for the weak retail environment, with same-store sales reports very soft. Outlays have also been held in check with spending down in certain categories in the last year including defense, transportation, science, international, and interestingly, interest on the debt. Sequester cuts, however, are just beginning to be felt. On the other ha…

Hanging in

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | September 20, 2013

Recent retail sales data are well below expectations and probably an indication that consumers have become more cautious about spending. Financial conditions matter greatly, and the recent tightening is likely having some impact on housing activity and consumer attitudes. Spending follows wages and it will be difficult for retail spending to gain much traction with the tie to shallow compensation trends. The best one can say about consumer spe…