Research & News
Asset Allocation Quarterly (Second Quarter 2018)
Near-term expectations for earnings growth resulting from the Tax Cuts and Jobs Act of 2017 remain heightened. Continued Fed policy tightening, through measured increases in the fed funds rate and reductions in the size of the Fed’s balance sheet, is not expected to weigh on the economy over the next two years. Our outlook for… Read More »
Weekly Geopolitical Report – Reflections on Globalization: Part II (April 16, 2018)
by Bill O’Grady Last week, we introduced this topic by discussing the Cold War. This week, we will continue our analysis with a reflection on markets, an examination of hegemony and a discussion of the expansion of globalization and the rise of meritocracy and its discontents. What about Markets? Market economics is based on how humans… Read More »
Asset Allocation Weekly (April 13, 2018)
by Asset Allocation Committee One of the great unknowns in this recovery and expansion is the proper measure of economic slack. Although it’s a term that is rather easy to understand in the abstract, actually defining it is difficult. The Congressional Budget Office (CBO) produces an estimate of potential GDP but it is, at best, a… Read More »
Weekly Geopolitical Report – Reflections on Globalization: Part I (April 9, 2018)
by Bill O’Grady For much of recorded human history, we have seen waves of globalization and deglobalization.[1] Periods of globalization tend to be characterized by the emergence of either large regional hegemons or global hegemons. When these hegemons see their power wane, deglobalization occurs. Recently, globalization has come under fire. In some circles, being called a… Read More »
Asset Allocation Weekly (April 6, 2018)
by Asset Allocation Committee Recently, the three-month T-bill/Eurodollar spread (TED spread) has widened, raising concerns about financial stability. In this report, we will offer a primer on the spread and discuss its recent rise. The TED spread has two components; it’s a direction-of-rate spread and a flight-to-quality spread. Eurodollars (also known as LIBOR) represent dollar borrowing… Read More »
Asset Allocation Weekly (March 29, 2018)
by Asset Allocation Committee After peaking at 2872.87 on January 26, the S&P 500 has been in a corrective phase. The index fell just over 10% and has been range bound ever since, well below the aforementioned high. Here are the primary reasons equities have struggled: Valuations became a bit stretched: The P/E, as we calculate… Read More »
Weekly Geopolitical Report – The North Korean Summit: Part II (March 26, 2018)
by Bill O’Grady (Due to the Easter holiday, the next report will be published on April 9.) Last week,[1] we discussed the six major nations involved in the North Korean issue and each country’s geopolitical goals, constraints and meeting positions for the recently proposed summit between the U.S. and North Korea. This week, we will examine… Read More »
Asset Allocation Weekly (March 23, 2018)
by Asset Allocation Committee Last week, the Federal Reserve published its Financial Accounts of the United States report, formerly known as the Flow of Funds report. The report is a storehouse of important financial information. In this most recent report, a few things emerged that raised concerns. The first issue is net saving. Net saving is… Read More »
Weekly Geopolitical Report – The North Korean Summit: Part I (March 19, 2018)
by Bill O’Grady On March 8, officials from South Korea, including Chung Eui-yong, the director of South Korea’s National Security Office, came to Washington to brief U.S. officials on a recent dinner with Kim Jong-un, the leader of North Korea. The dinner was held in Pyongyang at North Korea’s Workers’ Party Headquarters, Kim’s workplace, where Mr.… Read More »
Asset Allocation Weekly (March 16, 2018)
by Asset Allocation Committee Last week, we discussed the fact that the generally strong economy should be supportive for equity markets as economic growth will tend to support earnings. However, the other important element of equity valuation is what multiple investors put on those earnings. The most common valuation metric is the price/earnings ratio (P/E). Our… Read More »