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Building Economic Momentum – Navigating The Widening Recovery April 12, 2021 Our outlook for the U.S. economy has improved. We now expect real GDP growth over the course of 2021 to be close to 7%, which would be the fastest annual growth rate since 1984. Monetary conditions in the U.S. continue to look strong as do measures of fundamental economic health, such as purchasing manager indices (PMIs). The following graph shows the three-month moving average PMI minus the 12-month moving average PMI. When the 12-month is higher than the three-month, the pace of economic growth is expected to be slowing. Conversely, when the three-month is higher than the 12-month, as is the case today, we expect the pace of economic growth to be accelerating. ....
April 12, 2021 A strong jobs report brought unemployment back to 6%, PMI surveys show optimism at a 37-year high, and every sector was positive on the month and quarter. These and other economic topics are examined in March’s edition of Julex’s Monthly Macro Chartbook. Content continues below advertisement ....
April 5, 2021 With rates having been so low for so long, savers have been hurt by the lack of available safe income in the market. Conventional wisdom says that these savers will either be pushed into risker assets or forced to take the historically low interest rates offered by low-risk debt. A more novel solution is also possible, however. Regardless of one’s portfolio make-up, utilizing option overlays is one way to provide consistent income with a low probability of loss. One example is an iron condor strategy. This strategy writes out of the money puts and calls to produce income, and then buys deeper out of the money puts and calls to protect against losses. By buying and selling the options on an index, the income generated from the strategy is tax advantaged (60% long-term, 40% short-term) even though the options may be short-dated. Also, one need not own the index to use the strategy. Any portfolio can act as margin, and the maximum potential loss is defined a ....
performance of deflationary assets vs. those which are inflationary since 1960. Content continues below advertisement For most of the past decade, as technology companies increased our productivity and China exported deflation to the Western hemisphere, inflationary pressures were suppressed. Hence, deflationary assets outperformed inflationary assets, but that is starting to change. Here is why: Covid broke supply chains which increased the cost of materials (ask anyone who is doing a home renovation project how much the cost of wood, cement, or tiles has gone up). PC Richards is telling me it is going to take six months for my new stove & fridge to arrive. I ordered them in January, and they anticipate a late June delivery because the manufacturer cannot get the parts to build the products. The worst part is that I am expecting my third child in late June. Good times! ....
The Fixed Income Conundrum: Part 2 Diversification Solutions April 5, 2021 For investors and advisors, planning for income has been a consistent and escalating challenge for more than a decade. More recently, we have seen a yield curve inversion, a recession, and the 10-year treasury drop to a historic low at just over 0.50%. Today, plan implementation with traditional bonds is as challenging as it has ever been while inventories are light, spreads are tight, and yield is hard to come by. At the same time, we have seen a massive rise in the availability and adoption of fixed income ETFs as a viable alternative to achieve diversified exposure in the fixed income markets. In fact, according to Bloomberg, U.S. fixed income ETF assets are nearing $1 trillion (exhibit 1). Additionally, fixed income ETF growth has spanned all areas of the fixed income market and now offers easy access and diversification opportunities previously not readily available to individual investors. I ....