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Posted By Lineweaver Financial Group
January 20, 2021 Category: Economy, 2021 Outlook, Economic Commentary

What a year - 2020! The market achieved record highs near year-end despite a collection of intertwined seismic events during the period - the worst global pandemic in a century, resulting in profound changes in our way of life, massive reactive policy shifts, presidential election controversy, “warp-speed” medical innovations, the most rapid materialization of a bear market on record, and among the largest and most rapid market recoveries in history. Yet, with the recent development and distribution of vaccines, accommodative and stimulative policies around the globe, and the likelihood of a divided US government; there looks to be light at the end of the tunnel and the prospects for global economic recovery appear to be on the upswing setting the stage for a constructive and hopefully more normal 2021.     While the market ended up for the year, 2020 was marked with intense volatility. Reacting to the most profound health crisis in a century, the year featured the onslaught of the most rapid “bear market” (a decline of 20% or more) on record. Blackrock research sites that in just 23 trading days following the market hitting new highs on February 19, the S&P 500 declined 34%! In March alone the market was up or down more than 4% eight separate times! In comparison there were only 6 such days in 1929 during the Great Depression, and the annual average of plus or minus 4% days over the past 90 years is just 3.2 days. From its lows the marke

Posted By Lineweaver Financial Group
January 20, 2021 Category: Economy, Economic Outlook, Economic Commentary

We have entered a new investment order.  The Covid-19 pandemic has accelerated profound shifts in how economies and societies operate. We see transformations across sustainability, inequality, geopolitics and macro policy. This is reflected in our 2021 investment themes: The New Nominal, Globalization Rewired, and Turbocharged Transformations. The new investment order is still evolving, and investors will need to adapt. Yet the features are becoming clear, and we believe this calls for a fundamental rethink of portfolio allocations – starting now. The New Nominal We see stronger growth and lower real yields ahead as the vaccine-led restart accelerates and central banks limit the rise of nominal yields – even as inflation expectations climb. Inflation will have different implications to the past.  Strategic implication: We underweight government bonds and see equities supported by falling real rates.  Tactical implication: Our low rate outlook keeps us pro-risk. We like U.S. equities and prefer high yield for income. Globalization Rewired Covid-19 has accelerated geopolitical transformations such as a bipolar U.S.-China world order and a remaking of global supply chains – placing greater weight on resilience and less on efficiency.  Strategic implication: We favor deliberate country diversification and above-benchmark China exposures.  Tactical implication: We like EM equities, especially Asia ex-Japan, and are underweight Eur

Posted By Lineweaver Financial Group
October 19, 2020 Category: Economic Commentary, 2020Q4, Newsletter

Many positive signals appeared in the quarter. Millions of Americans went to work again; monthly net job growth topped 1.7 million in July and 1.3 million a month later. Unemployment, which had hit 14.7% in April, fell from 10.2% in July to 8.4% in August, and the U-6 rate counting both underemployed and unemployed Americans declined from 16.5% to 14.2%.1,2 Consumer confidence, as measured by the Conference Board’s monthly index, leaped to 101.8 in August from 86.3 in July. Households kept up their buying—retail sales were up year-over-year through August even though supplemental unemployment benefits expired at the end of July.1  Industries also grew, according to research from the Institute for Supply Management. When ISM’s Monthly Purchasing Manager Index for the manufacturing and services sector surpasses 50, those sectors are judged by ISM to be expanding. ISM’s services PMI was at 58.1 in July and 56.9 in August; its manufacturing index reached 54.2 in July (a month that saw a 6.4% rise in U.S. factory orders) and 56.0 in August.1 Home sales soared as summer began, and although that momentum tailed off, sales did not retreat. Residential resales were up 24.7% in July, and another 2.4% in August. New home buying increased 4.8% for August after a 14.7% July climb. Housing starts and building permits were both up 17.9% in the first month of the quarter, but then they both declined; permits dipped 0.9% and starts 5.1% in the eighth month of t

Posted By Lineweaver Financial Group
July 16, 2020 Category: Economic Commentary, 2020Q3

Summer is here: Making lemonade out of lemons The great poet Ralph Waldo Emerson famously wrote, “Do what we can, summer will have its flies.” As we head into the summer months, this mood may best describe nervous investors who recently experienced large bouts of market volatility due to the spread of the coronavirus. The S&P 500 Index fell 34% from its all-time high reached on February 19 to its low on March 23. While it has recovered since then, we are seeing global economic activity reflects the implementation of mandatory “shelter-in-place” policies. Simultaneously, extreme moves in the oil market — with West Texas Intermediate (WTI) oil futures prices at one point trading in negative territory due to fears of oversupply — caused additional distress in markets. Globally, central banks and governments stepped up to provide unprecedented levels of stimulus measures on both the monetary policy and fiscal fronts. We see three investment implications from this stimulus. First, we would like to maintain core benchmark holdings and rebalance selectively into risk assets such as credits. Second, we see coupon income as critical in a low-yield world and prefer allocations to corporate credit and even select equity industries. Finally, we would maintain resilient portfolios by focusing on U.S. equities and diversifying perceived safe havens, such as U.S. Treasuries. Investor risk sentiment began to improve in line with reduced market vola

Posted By Lineweaver Financial Group
April 07, 2020 Category: Economic Commentary

The COVID-19 virus has made a brief global recession likely. While the duration of the virus pandemic is unpredictable, policy stimulus, pent-up demand and a lack of major imbalances argue for a solid upswing when the virus threat clears. The containment measures being taken across the globe to combat the virus will have a large economic impact. Global gross domestic product (GDP) growth will probably be negative in the first quarter and will enter the second quarter at risk of contracting further.   Provided the virus is transitory—perhaps contained in the second quarter—the global economy should be poised to rebound in the second half of 2020. The combination of monetary and fiscal stimulus on top of last year’s global central-bank easing, in addition to the reduction in China-U.S. trade tensions, argues for a solid recovery when the virus threat recedes. In the U.S., the government’s virus containment measures mean a technical recession—negative GDP growth in Q1 and Q2—seems likely. Fiscal policy will be important in helping to offset the recession.  The economic impact of the virus may turn out larger than expected. The shock to consumer and business confidence could generate a self-sustaining economic downturn. A re-run of the 2008 financial crisis seems unlikely. Tier 1 capital ratios for large U.S. banks are significantly improved from where they were in 2007 and should cushion against the risk of a severe draw

Posted By Lineweaver Financial Group
January 07, 2020 Category: General, Economic Commentary

  Our reference to the classic Toots and the Maytals song comes as we see a de-escalation in trade tensions with China, diminishing risks of a no-deal Brexit and few signs that the record U.S. economic expansion is ending or reversing. Still, persistent trade uncertainty is denting business confidence and spending, particularly the longer-term risk of an unravelling of the global supply chain. Our take on the major investor themes for the weeks ahead:   U.S. Equites: Sector Steering Defensive sectors have outperformed cyclicals this year against a backdrop of slowing growth and falling interest rates. However, we expect central bank easing could provide a floor for growth in the coming months. Among cyclicals, we remain constructive on technology, while we prefer less rate-sensitive sectors.   Developed Markets: Winter of our discontent? Trade uncertainties and slowing growth have taken a toll on developed world stocks outside the United States. But not all DMs are created equal, and there are signs that the global growth slowdown has hit bottom, while central bank easing could help.   Emerging Markets: China's mixed outlook A temporary trade truce with the United States provided some optimism around China over the last month. However, China's growth slowdown has become more pronounced.   Fixed Income: Seeking defense in credit U.S. government bond yields have responded to geopolitical risks over the past few months both ways, wh

Posted By Lineweaver Financial Group
July 02, 2019 Category: Economic Commentary, Review, Q3

Investment Directions - Staycation or Vacation? “Sell in May and go away” is an old maxim for investors. Evidence is mixed on its validity, but given this year’s rally, the temptation now is understandable. Our take: consider taking some profits and rotating into exposures that offer more resilience if volatility returns. Think of it as the investor version of a “staycation” and catch up on chores. With that in mind, our take on the major investor themes for the weeks ahead: U.S. Equities: Reverting to Technology We remain overweight U.S. equities, and one of our favored sectors is technology. Even with strong performance this year, we believe the sector remains appealing. Technology firms tend to have strong balance sheets and enjoy support from longer-term trends, attractive qualities in a late economic cycle. Furthermore, tech stocks have historically fared well through various yield curve regimes. Developed Markets: Europe Poised for Revival? Investors in Europe have had little reason for optimism for some time. But we expect European growth to accelerate this year given solid domestic demand. Valuations look attractive relative to history, although political and trade risks linger. China’s efforts to stimulate its own growth could help export-heavy economies, such as Germany. Emerging Markets: Brazil Waiting on Reform Brazilian assets have underperformed the broad emerging market index this year, despite signs that economic growth

Posted By Lineweaver Financial Group
April 02, 2019 Category: Economic Commentary, Q2 2019

Investment Directions - Spring Forward Once again, spring is near, a time of growth, renewal and restoration. But with concerns over slowing growth, uncertainty around economic and earnings outlooks, and ever-present U.S.-China and European political risks, investors should be prepared for potential spring volatility. Our take on the major themes for this quarter:  U.S. Equities: The Healthy Healthcare Sector  In an environment of slowing growth and less certain earnings outlooks, the traditional defensive qualities and resilient earnings growth of healthcare stocks are appealing. Plus, valuations broadly look reasonable compared to historical levels. Tactical investors may consider getting more granular with the medical devices industry. Developed markets: What Next for Brexit? With Theresa May’s Brexit plan resoundingly defeated, she must now renegotiate a deal. We believe the United Kingdom is likely to avoid a hard exit with an extension of the March 29 deadline to exit and gain time to draft a passable proposal. But lingering uncertainty is likely to keep U.K. assets under pressure while a deeper slowdown in European and global growth only accentuates the challenges. We remain underweight in U.K. and European equities. Emerging Markets: China Looking Ahead Although Chinese equities tumbled in 2018, we continue to favor China as well as emerging markets overall. Although trade tensions are likely to persist, we believe frictions will subside in the

Posted By Lineweaver Financial Group
January 07, 2019 Category: Economic Commentary, 2019, Q1

Global financial markets experienced heightened volatility during the fourth quarter of 2018 as concerns surrounding higher interest rates here in the U.S., and uncertain trade and tariff relations worldwide, weighed heavily on investor sentiment. We present a few highlights from the 4Q18 below: •    U.S. equity markets sold off sharply during the fourth quarter in volatile and choppy trade, with large intra-day moves the norm. In this “risk-off” environment, the S & P 500, the Dow Jones Industrial Average and the technology-heavy Nasdaq Composite traded sharply lower. On the economic front, U.S. economic data remained strong. However, there are potential international and domestic headwinds that could dampen growth, particularly uncertainty surrounding trade policy for U.S. businesses.  •    Developed international equity markets posted steep declines in tandem with those here in the U.S. Financial markets in the Eurozone generally lagged those in the Pacific ex-Japan region as Brexit worries persisted. On the political front, Prime Minister May faced resistance from her EU counterparts in a bid for new Brexit concessions, sparking concerns of a chaotic no-deal outcome that could potentially be damaging for the European and British economies. In the emerging markets, returns were held back by weak performances from several large Asian economies.  •    Within fixed income, results were

Posted By Lineweaver Financial Group
October 15, 2018 Category: Economic Commentary, Newsletter

Global financial markets posted mixed results during the third quarter of 2018 as investors balanced heightened trade tensions globally with strong earnings, a solid labor market and healthy economic growth here in the U.S. We present a few highlights from the 3Q18 below: Despite heightened geopolitical rhetoric, the S and P 500, the Dow Jones Industrial Average and the technology-heavy Nasdaq Composite continued to trade near record highs amid solid economic data and strong corporate earnings. On the economic front, the Federal Reserve held interest rates steady at a range of 1.75% to 2%. However, meeting minutes released from the Fed’s early August session indicated a rate hike was likely when the Fed meets September 25th-26th. Developed international equity markets produced mixed results during the third quarter with those in the Pacific ex-Japan region generally lagging those in Europe. On the political front, the resignation of Brexit secretary David Davis renewed fears of the potential economic consequences as the UK prepares to leave the EU in March 2019. In the emerging markets, returns were held back by weak performances from China and Brazil. Within fixed income, results were mixed as the 10-year U.S. Treasury tested the key psychological level of 3% several times during the third quarter. Foreign un-hedged bonds and emerging markets debt fell amid the strong U.S. dollar. Investment grade core U.S. fixed income produced lackluster results, while high yield