We believe our clients should have the information they need to provide perspective on economic developments and recent market performance.

Our recent commentary includes both periodic articles and quarterly observations. The periodic Bullish Perspectives posts address a wide range of economic and financial planning subjects which we believe our clients might find interesting. The quarterly Economic Commentary entries are intended to help frame recent market performance for our clients from a global investing standpoint.

Bullish Perspectives | The Present Value of Future Tariffs

by Harry Callewaert

On June 6th, three months following their announcement, the U.S. implemented 25% tariffs on $34 billion worth of Chinese imports, promising a second act in the neighborhood of $16 billion. Discounting China’s retaliatory measures of the same amount, the duties imposed so far would affect the equivalent of 0.6% of global trade and account for 0.1% of global GDP, according to a note issued by Morgan Stanley. Market reactions to news of the levies taking effect were moderately negative. Both the Dow and the S&P 500 fell by 0.6%. Ten of the eleven sectors in the latter index traded lower, with the materials and industrials segments posting the biggest losses. The utilities sector—a defensive play given its hefty dividend payments—was the only group trading higher with a gain of 0.8%. Four days later, the Trump administration announced that it would assess 10% tariffs on an additional $200 billion in Chinese goods in two months’ time.1

Economic Commentary | Second Quarter 2018

While the broad economy continued to improve during the quarter, trade tensions with both China and Europe once again dominated investor attention.  In addition, global central banks have shifted toward tighter monetary policy, which will make further economic gains harder to achieve.  As a result, we saw quite a wide range in returns for our stock asset classes this quarter, with the US outperforming international indices.  For the three months ending June 30, 2018, the large cap S&P 500 index gained 3.4%, the mid/small cap Russell 2000 index was up 7.7%, the international MSCI EAFE index was down 1.2%, and the emerging markets MSCI EM declined by 8.7%.


Economic Commentary | First Quarter 2018

The market began the new year by continuing its upward march, as the S&P 500 index amassed thirteen new all-time highs in January in only twenty-one trading days!  By the end of that first month, however, a very strong jobs report rattled investors who were increasingly concerned with mounting inflationary pressures.  An official correction ensued, taking the S&P 500 index down more than 10% off its high over only nine trading days.  After taking some comfort from the resilience of the global economy, investors propelled the market higher once again until early March when President Trump announced tariffs on steel and aluminum in what was the initial salvo in a developing trade war with China.  During March, the two parties escalated tensions with threats of tariffs on various exports, culminating in a steep market sell-off which began in the US but spread across the globe.  For the three months ending March 31, 2018, the large cap S&P 500 index decreased 0.8%, the mid/small cap Russell 2000 index was down 0.1%, and the international MSCI EAFE index lost 1.5%.


Bullish Perspectives | The Great Tax Shuffle of 2018


The Tax Cuts and Jobs Act was signed into law on December 22, 2017.  It affects corporate taxes, which until now represented about 9% of federal tax revenue, as well as individual income taxes, which are nearly half of federal tax revenue.  A primary goal of lowering corporate taxes was clearly achieved, as the corporate tax rate of 35% was reduced to 21%.  Accomplishment of a companion goal of enhancing corporate global competitiveness will depend on the question of whether lower taxes are the key to enhancing global competitiveness, which will take time to answer.  A secondary goal of simplifying the tax code was largely left by the waysideREAD MORE

Economic Commentary | Fourth Quarter 2017

For the final three months of 2017, the stock market continued its upward march, as the S&P 500 index clocked in 29 additional new all-time highs.  Investors’ optimism, despite myriad geopolitical risks, was largely based upon the pro-business tax reform package that Congress ultimately passed in the waning days of the year.  For the three months ending December 31, 2017, the large cap S&P 500 index increased 6.6%, the mid/small cap Russell 2000 index gained 3.3%, and the international MSCI EAFE index rose by 4.2%.


Bullish Perspectives | The Lagged Inflation Specter

The Federal Open Market Committee, which sets short term interest rate targets for the US, has been gradually increasing its policy rate for the past two years.  Starting from a target of less than a 0.25% in late 2015, the Fed has increased the target by 1.00% in four moves.  Next year, current Fed Chairperson Janet Yellen will pass the baton to Jerome Powell, who is expected to remain true to the policies of the current Fed.  That means continuing to gradually increase the target rate as possible in the interest of maintaining a balance in the Fed’s mandate of fostering full employment while limiting inflation.  But inflation may not be as significant of a concern as policy makers believe.


Economic Commentary | Third Quarter 2017

Despite a plethora of reasons for investors to fret, the stock market has continued to forge ahead in recent months.  During the third quarter, we saw tensions rising between the US and North Korea, several attempts at healthcare reform fizzling out, a central bank that is removing monetary stimulation, and three separate major hurricanes making landfall in the US.  Investors seemingly shrugged off these concerns, and for the three months ending September 30, 2017, the large cap S&P 500 index increased 4.5%, the mid/small cap Russell 2000 index gained 5.7%, and the international MSCI EAFE index rose by 5.4%.


Bullish Perspectives | The Price Also Matters

More than $200 billion.  According to stock market expectations, that is the combined net income of Facebook, Amazon, Netflix, and Google (or, rather, Google’s parent company Alphabet), popularly known as the FANG stocks, ten years from now.  Stock market participants are so excited about the prospects for these four companies that, when weighted by market capitalization size of the companies, they are willing to pay more than 50 times the amount these companies are expected to earn over the next year for the privilege of owning their stock.


Bullish Perspectives | PTSD: Passively Traded Stock Dislocations

Passive investment vehicles such as index mutual funds and exchange traded funds have received about $1.7 trillion of new money from investors over the past 10 years, even as actively managed funds have seen a net $1.0 trillion of outflows.  The appeal of the lower costs in managing passive funds is alluring.  We have written in the past about the risks of a negative feedback loop in passive investing during a market downturn.  Passive investing creates other market aberrations, as well, as seen in the case of WPX Energy near the start of this month.


Economic Commentary | Second Quarter 2017

Despite heightened domestic political risk, rising tensions with both North Korea and Syria, persistent pressure on global oil prices, and a Federal Reserve that is actively removing monetary accommodation, the market saw plenty of reasons to cheer this past quarter.  For the three months ending June 30, 2017, the large cap S&P 500 index increased 3.1%, the mid/small cap Russell 2000 index gained 2.5%, and the international MSCI EAFE index rose by 6.1%.