Despite a recent modest pullback in U.S. stocks, and a sharper one in international markets—reflecting both trade worries and the recent strength in the U.S. dollar—we don’t believe it marks the beginning of a more severe correction. Risks of a prolonged trade dispute have risen but it’s too soon to declare war; while the possibility of a positive resolution that would likely be a tailwind for equities. For now, a healthy U.S. economy is an offset to those growing worries. Threats to the current bull market have risen, and they include this being a midterm election year—which have historically been accompanied by larger-than-average maximum drawdowns. We continue to espouse discipline and diversification; but for now it’s in the context of an ongoing bull market.
We’re a little more than a week into the 2018 FIFA World Cup, and so far Russia has surprised experts and fans alike. Expectations were low at best. Because of recent setbacks, including a disastrous performance at the 2016 UEFA European Championship and injuries sustained by key players, the federation ranked a dismal 66th place among Fédération Internationale de Football Association teams—its lowest position ever. The only reason it didn’t have to qualify to compete was because Russia is the host nation. (This is the first time in its 88-year history, by the way, that the World Cup has been held in Eastern Europe.)
The S&P 500 was a bit of a rollercoaster this week with three days of losses and two days of gains. The index was up 0.19% from Thursday but is down 0.88% from last week. The index is up 2.19% YTD and is 4.11% below its record close.
This morning's release of the publicly available data from ECRI puts its Weekly Leading Index (WLI) at 150.1, up 0.9 from the previous week. Year-over-year the four-week moving average of the indicator is now at 3.71%, up from 3.36% last week. The WLI Growth indicator is now at 3.1, also up from the previous week.
Private equity funds continue to attract interest, despite rising deal valuations and high levels of leverage. We think there’s a way to get many of the benefits of private equity in public markets—without forfeiting liquidity.
This business expansion has gone on for nine years and most investors think we have to be near the end. In baseball parlance you hear talk that we are in the seventh or eighth inning; nobody seems to believe we are in the second or third. Jamie Dimon of J.P. Morgan has said at a conference we’re in the sixth, which got a lot of attention.
Thirty-year mortgage rates might have ticked up in the past 12 months, but for now that doesn’t seem to be weighing on new home demand. According to the Commerce Department, housing starts climbed to an 11-year high of 1.35 million units in May, a clear sign that the market has continued to improve following the subprime mortgage crisis a decade ago.
The latest Conference Board Leading Economic Index (LEI) for May increased to 109.5 from a revised 109.3 in April. The Coincident Economic Index (CEI) came in at 103.7, up from the previous month.
How can investors navigate volatility arising from late-cycle fiscal stimulus?
The latest Manufacturing Index came in at 19.9, down from last month's 34.4. The 3-month moving average came in at, down from 26.6 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 34.8, a decrease from the previous month's 38.7. Today's 19.9 headline number came in below the 28.9 forecast at Investing.com.