Quarterly Global Perspectives

Q4 Outlook: The Storm Before the Calm – The Sequel

October 19, 2020

Executive summary

  • A forecaster's nightmare: with no shortage of obstacles, misdirection and confusion, we dive deep in order to form a reasonable capital markets outlook
  • Context is key; the economic pendulum has swung from one extreme to the other, and appears to be swinging back again
  • The monetary and fiscal responses were the “triage needed to save the (economic) patient” but partial reopening is preventing the patient from fully healing
  • The Fed’s biggest move since the “Volker Shock”, what will be the FAIT of inflation?
  • Investors must plan for self-sustaining portfolios and not depend on Federal Bailouts

This is a forecaster's nightmare. There is no shortage of obstacles, zigs and zags, misdirection and plain old confusion that must be overcome to form a reasonable capital markets forecast over the next ten weeks. OK, now the difficult becomes impossible… or does it? We will investigate this and more in order to see through to the end of the year, but keep in mind, it is the “fundamentals that drive markets”.

Context is always important, but this is especially true when the pendulum swings from one extreme to the other. At the beginning of 2020 the United States’ longest expansion in recorded history was still, by and large, chugging along: unemployment was hovering around 50-year lows, real wage gains were accelerating in lower paying jobs, and the benefits of growth were being more widely shared. However, there were some signs that raised concern, such as manufacturing and corporate earnings growth turning negative, but by-and-large few foresaw the cataclysmic Bear Market on the horizon.

Then the pandemic reared its ugly head in mid-February and global economies shutdown like dominoes. Real GDP in the United States fell 31% in the second quarter; payrolls were slashed by 22 million; and Great Depression-like drive-up food lines were evident – scary indeed.

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2020 Forecast The Storm before the Calm — The Sequel

December 1, 2019

While warnings of recession, bear markets and trade wars going into and throughout 2019 were rampant, calendar year equity returns are shaping up to be among the best since 2009. What did the market miss, and what insight might it give us for our 2020 forecast? Well, contrary to popular belief, when the market is coming to an inflection point, it is fundamentals that show the way, notprice action, which in fact often shows the wrong way.

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3rd Quarter Update: Storm Clouds Gathering

October 1, 2019

The gathering storm clouds that first began forming across Europe, and then China are now developing over the U.S. In Europe, it seems imminent that the third quarter will signal a recession; China has its hands full with the U.S. supply chain; and the U.S. suffered a substantial negative surprise in its very important manufacturing sector.

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Midyear Update: May Showers Bring June Flowers

July 1, 2019

We unabashedly tout our 2019 theme, “The Storm before the Calm,” as it accurately unfolded in the markets in the first half. The storm in December was followed by a calm from January through April, which sent markets to near record highs.

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Markets Springing Ahead, not Springing a Leak

April 1, 2019

During the first quarter of 2019, a field of green across the board replaced the steep market declines of 4Q18. Double-digit equity returns rewarded investors in U.S. and international markets alike.

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2019 Forecast: The Storm Before the Calm

December 1, 2018

In 2019 we expect, and prudent investors should prepare for, “the storm before the calm” — tighter monetary conditions, uncertainty that includes a “disorderly Brexit” and increasing tensions between China and the United States on multiple fronts. 

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