VNFA In The News

Our Head of Investments, Connor Darrell, CFA was included among the “Lehigh Valley experts” commenting on how investors can protect their investments during market volatility.

Connor’s advice: “Have an emergency reserve. We typically recommend keeping about six months of routine living expenses in a money market or savings account, even during times of prosperity. This can help to manage any disruptions to cash flow that may come about from a period of economic weakness.” READ THE FULL ARTICLE

The Numbers & “Heat Map”

THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends. Interest Rates: Federal Reserve, Freddie Mac

US ECONOMIC HEAT MAP
The health of the US economy is a key driver of long-term returns in the stock market. Below, we grade 5 key economic conditions that we believe are of particular importance to investors.

CONSUMER SPENDING

A

Our consumer spending grade remains an A. Surveys of US consumers continue to indicate that the consumer is in a strong position, and recent GDP data provided further evidence of healthy consumer spending.

FED POLICIES

B+

Our Fed Policies grade remains a B+ after the Federal Reserve opted to cut its interest rate target by 25 bps following last month’s meeting. The cut was widely anticipated by markets, and if history is any representation, it is unlikely to be the last.

BUSINESS PROFITABILITY

B-

With most S&P 500 companies having reported earnings as of August 16, the EPS growth rate for the second quarter is close to zero. Despite the weak growth rate (which partially stems from difficult year-over-year comparisons), almost 75% of companies have beaten consensus estimates this quarter.

EMPLOYMENT

A

The US economy added 164,000 new jobs in July, right on target with consensus expectations. July’s report also showed that the size of the labor force (defined as those who are either working or actively seeking employment) grew to its highest level ever. The labor market remains one of the strongest components of the US economy.

INFLATION

B

Inflation is often a sign of “tightening” in the economy, and can be a signal that growth is peaking. The inflation rate remains benign at this time, but as the economic cycle continues to mature, this metric will deserve our ongoing attention.

OTHER CONCERNS

INTERNATIONAL RISKS

7

Following a re-escalation of the US/China trade dispute, we have raised our “international risks” metric back to a 7. Other key areas of focus for markets include the ongoing Brexit negotiations, rising economic nationalism around the globe, and escalating tensions in the Middle East.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Markets This Week

by Connor Darrell CFA, Assistant Vice President – Head of Investments

It was a volatile week for global equities, as trade tensions, geopolitics, and movements in the yield curve stoked fears of further weakening in the global economy. By far the biggest influence on market returns during the week was the inversion of the 10-year and 2-year treasury rates; which has historically been viewed as a recession warning. The ensuing shift in sentiment pushed equity markets into a selloff and provided further support for a bond market which has rallied strongly over the past 12 months. In fact, last week marked the first time in history that the 30-year U.S. treasury rate dropped below 2%; a sign that investors are questioning whether the economy will be able to return to previously achieved long-term growth rates. 

While it is likely that the future opportunities for investors will be fewer and farther between than in recent history, we remain cautiously optimistic that a trade deal will be achieved and that the confusion and uncertainty the trade tensions have caused will eventually be lifted. The timing of any deal remains entirely uncertain, but it is that uncertainty that makes it all the more important for investors to remain disciplined. We provide our current thinking on the recent volatility, the ongoing trade war, as well as the yield curve inversion in our most recent market note.

The Numbers & “Heat Map”

THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends. Interest Rates: Federal Reserve, Freddie Mac

US ECONOMIC HEAT MAP
The health of the US economy is a key driver of long-term returns in the stock market. Below, we grade 5 key economic conditions that we believe are of particular importance to investors.

CONSUMER SPENDING

A

Our consumer spending grade remains an A. Surveys of US consumers continue to indicate that the consumer is in a strong position, and recent GDP data provided further evidence of healthy consumer spending.

FED POLICIES

B+

Our Fed Policies grade remains a B+ after the Federal Reserve opted to cut its interest rate target by 25 bps following last month’s meeting. The cut was widely anticipated by markets, and if history is any representation, it is unlikely to be the last.

BUSINESS PROFITABILITY

B-

According to Factset, with 90% of S&P 500 companies having reported earnings as of August 9, the EPS growth rate for the second quarter is -0.7%. Despite the weak growth rate (which partially stems from difficult year-over-year comparisons), almost 75% of companies have beaten consensus estimates this quarter.

EMPLOYMENT

A

The US economy added 164,000 new jobs in July, right on target with consensus expectations. July’s report also showed that the size of the labor force (defined as those who are either working or actively seeking employment) grew to its highest level ever. The labor market remains one of the strongest components of the US economy.

INFLATION

B

Inflation is often a sign of “tightening” in the economy, and can be a signal that growth is peaking. The inflation rate remains benign at this time, but as the economic cycle continues to mature, this metric will deserve our ongoing attention.

OTHER CONCERNS

INTERNATIONAL RISKS

7

Following a re-escalation of the US/China trade dispute, we have raised our “international risks” metric back to a 7. Other key areas of focus for markets include the ongoing Brexit negotiations, rising economic nationalism around the globe, and escalating tensions in the Middle East.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.