Strong fundamentals shine through noisy headlines

Here’s What We’re Thinking

May 16, 2018

Significant developments across global economic, political and market trends have accelerated in recent weeks with important implications for investors across asset classes. On the economic front, growth indicators have cooled from last year’s red-hot state but remain at a still-healthy, above-trend pace (such as the U.S. unemployment rate falling below 4%). Inflation has continued to creep higher in most major economies, lifting short and long-term interest rates over the past month. The political landscape remains fluid with the U.S. announcing its withdrawal from the Iran nuclear agreement, U.S.-China trade talks continuing with no tangible progress reported, NAFTA negotiations approaching a May 17th deadline set by the U.S. Congress (to allow enough time to approve a potential new deal in the current session), and the U.S.-North Korea summit set for June 12th…

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Extended economic recovery leaves cycle in later stages; recession odds remain modest

Here’s What We’re Thinking

May 2, 2018

Recent economic data for the first quarter of 2018 suggest the global economy cooled off from its red-hot pace of the second half of last year. However, economic activity remains well above its trend (or potential) growth rate, resulting in diminished excess capacity across most economies. This is reflected in declining unemployment rates and rising capacity utilization rates. As a result, inflation readings have ticked higher as tighter labour and goods markets result in stronger wage gains and quicker price increases. In response, central bankers, including those in Canada and the United States, have become more confident in tightening monetary policy. Strong growth, diminished excess capacity, and rising inflation and interest rates are all consistent with an economy in the later stages of its business cycle…

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