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.

FED POLICIES

C+

Following its March meeting, the Federal Reserve signaled to markets that it may not hike interest rates during 2019, and plans to halt its balance sheet reductions. The Fed’s future actions will remain data dependent, but the contractionary policies that have dominated the last two years appear to be on pause.

BUSINESS PROFITABILITY

B-

As was anticipated, first quarter earnings revealed a tapering of growth. According to Facset, the blended earnings decline for Q1 2019 is -0.4% (with 98% of S&P 500 companies having reported). However, more than 75% of these companies have reported earnings that were higher than consensus estimates.

EMPLOYMENT

A

The US economy added just 75,000 new jobs in May, well below the consensus estimates as well as recent trends. However, monthly jobs data tends to be volatile, and it is certainly possible that there is a significant rebound in June (as there was between February and March). We continue to view the jobs market as very healthy.

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 we see the potential for an increase moving forward. This metric deserves our attention.

OTHER CONCERNS

INTERNATIONAL RISKS

7

We have raised our international risks rating to a 7 as a result of rising tensions between the US and Iran, as well as the recent decision by the Trump administration to impose a sales ban on Chinese tech company Huawei. The ban is representative of the risks associated with the growing technology rivalry between the US and China.

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.

FED POLICIES

C+

Following its March meeting, the Federal Reserve signaled to markets that it may not hike interest rates during 2019, and plans to halt its balance sheet reductions. The Fed’s future actions will remain data dependent, but the contractionary policies that have dominated the last two years appear to be on pause.

BUSINESS PROFITABILITY

B-

As was anticipated, first quarter earnings revealed a tapering of growth. According to Facset, the blended earnings decline for Q1 2019 is -0.4% (with 98% of S&P 500 companies having reported). However, more than 75% of these companies have reported earnings that were higher than consensus estimates.

EMPLOYMENT

A

The US economy added 263,000 new jobs in April, helping to push the unemployment rate to its lowest level in over 50 years. We have now observed 100 consecutive months of job growth in the United States.

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 we see the potential for an increase moving forward. This metric deserves our attention.

OTHER CONCERNS

INTERNATIONAL RISKS

7

We have raised our international risks rating to a 7 as a result of rising tensions between the US and Iran, as well as the recent decision by the Trump administration to impose a sales ban on Chinese tech company Huawei. The ban is representative of the risks associated with the growing technology rivalry between the US and China.

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 retail sales figures surprised to the upside.

FED POLICIES

C+

Following its March meeting, the Federal Reserve signaled to markets that it may not hike interest rates during 2019, and plans to halt its balance sheet reductions. The Fed’s future actions will remain data dependent, but the contractionary policies that have dominated the last two years appear to be on pause.

BUSINESS PROFITABILITY

B-

Corporate earnings remain strong, but we anticipate earnings growth will taper off in 2019. According toFacset, the expected earnings growth rate for S&P 500 companies during 2019 is around 4%. This is below the long-term average for the current cycle.

EMPLOYMENT

A

The US economy added 263,000 new jobs in April, helping to push the unemployment rate to its lowest level in over 50 years. We have now observed 100 consecutive months of job growth in the United States.

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 we see the potential for an increase moving forward. This metric deserves our attention.

OTHER CONCERNS

INTERNATIONAL RISKS

7

We have raised our international risks rating to a 7 as a result of rising tensions between the US and Iran, as well as the recent decision by the Trump administration to impose a sales ban on Chinese tech company Huawei. The ban is representative of the risks associated with the growing technology rivalry between the US and China.

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 retail sales figures surprised to the upside.

FED POLICIES

C+

Following its March meeting, the Federal Reserve signaled to markets that it may not hike interest rates during 2019, and plans to halt its balance sheet reductions. The Fed’s future actions will remain data dependent, but the contractionary policies that have dominated the last two years appear to be on pause.

BUSINESS PROFITABILITY

B-

Corporate earnings remain strong, but we anticipate earnings growth will taper off in 2019. According toFacset, the expected earnings growth rate for S&P 500 companies during 2019 is around 4%. This is below the long-term average for the current cycle.

EMPLOYMENT

A

The US economy added 263,000 new jobs in April, helping to push the unemployment rate to its lowest level in over 50 years. We have now observed 100 consecutive months of job growth in the United States.

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 we see the potential for an increase moving forward. This metric deserves our attention.

OTHER CONCERNS

INTERNATIONAL RISKS

5

The above ratings assume no international crisis. The ongoing trade negotiations between the US and China and the escalating geopolitical tensions in the middle east both present potential areas of concern. But on a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 5 at this time.

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 retail sales figures surprised to the upside.

FED POLICIES

C+

Following its March meeting, the Federal Reserve signaled to markets that it may not hike interest rates during 2019, and plans to halt its balance sheet reductions. The Fed’s future actions will remain data dependent, but the contractionary policies that have dominated the last two years appear to be on pause.

BUSINESS PROFITABILITY

B-

Corporate earnings remain strong, but we anticipate earnings growth will taper off in 2019. According to Facset, the expected earnings growth rate for S&P 500 companies during 2019 is around 4%. This is below the long-term average for the current cycle.

EMPLOYMENT

A

The US economy added 263,000 new jobs in April, helping to push the unemployment rate to its lowest level in over 50 years. We have now observed 100 consecutive months of job growth in the United States.

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 we see the potential for an increase moving forward. This metric deserves our attention.

OTHER CONCERNS

INTERNATIONAL RISKS

5

The above ratings assume no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 5. These risks deserve our ongoing attention.

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 the March retail sales figures reported last week surprised to the upside.

FED POLICIES

C+

Following its March meeting, the Federal Reserve signaled to markets that it may not hike interest rates during 2019, and plans to halt its balance sheet reductions. The Fed’s future actions will remain data dependent, but the contractionary policies that have dominated the last two years appear to be on pause.

BUSINESS PROFITABILITY

B-

Corporate earnings remain strong, but we anticipate earnings growth will taper off in 2019. According toFacset, the expected earnings growth rate for S&P 500 companies during 2019 is around 4%. This is below the long-term average for the current cycle.

EMPLOYMENT

A

The US economy added 196,000 new jobs in March, helping to alleviate concerns from an unexpectedly weak February report. Encouragingly, we have also observed some healthy wage growth, which is currently above the rate of inflation.

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 we see the potential for an increase moving forward. This metric deserves our attention.

OTHER CONCERNS

INTERNATIONAL RISKS

5

The above ratings assume no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 5. These risks deserve our ongoing attention.

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 the March retail sales figures reported last week surprised to the upside.

FED POLICIES

C+

(Upgraded from C-) Following its March meeting, the Federal Reserve signaled to markets that it may not hike interest rates during 2019, and plans to halt its balance sheet reductions. The Fed’s future actions will remain data dependent, but the contractionary policies that have dominated the last two years appear to be on pause.

BUSINESS PROFITABILITY

B-

(Downgraded from B+) Corporate earnings remain strong, but we anticipate earnings growth will taper off in 2019. According toFacset, the expected earnings growth rate for S&P 500 companies during 2019 is around 4%. This is below the long-term average for the current cycle.

EMPLOYMENT

A

The US economy added 196,000 new jobs in March, helping to alleviate concerns from an unexpectedly weak February report. Encouragingly, we have also observed some healthy wage growth, which is currently above the rate of inflation.

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 we see the potential for an increase moving forward. This metric deserves our attention.

OTHER CONCERNS

INTERNATIONAL RISKS

5

The above ratings assume no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 5. These risks deserve our ongoing attention.

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 a recent bounceback in existing home sales suggests that households are still willing to make large purchases, which bodes well for the economy and for markets.

FED POLICIES

C+

(Upgraded from C-) Following its March meeting, the Federal Reserve signaled to markets that it may not hike interest rates during 2019, and plans to halt its balance sheet reductions. The Fed’s future actions will remain data dependent, but the contractionary policies that have dominated the last two years appear to be on pause.

BUSINESS PROFITABILITY

B-

(Downgraded from B+) Corporate earnings remain strong, but we anticipate earnings growth will taper off in 2019. According toFacset, the expected earnings growth rate for S&P 500 companies during 2019 is around 4%. This is below the long-term average for the current cycle.

EMPLOYMENT

A

The US economy added 196,000 new jobs in March, helping to alleviate concerns from an unexpectedly weak February report. Encouragingly, we have also observed some healthy wage growth, which is currently above the rate of inflation.

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 we see the potential for an increase moving forward. This metric deserves our attention.

OTHER CONCERNS

INTERNATIONAL RISKS

5

The above ratings assume no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 5. These risks deserve our ongoing attention.

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 a recent bounceback in existing home sales suggests that households are still willing to make large purchases, which bodes well for the economy and for markets.

FED POLICIES

C+

(Upgraded from C-) Following its March meeting, the Federal Reserve signaled to markets that it may not hike interest rates during 2019, and plans to halt its balance sheet reductions. The Fed’s future actions will remain data dependent, but the contractionary policies that have dominated the last two years appear to be on pause.

BUSINESS PROFITABILITY

B-

(Downgraded from B+) Corporate earnings remain strong, but we anticipate earnings growth will taper off in 2019. According toFacset, the expected earnings growth rate for S&P 500 companies during 2019 is around 4%. This is below the long-term average for the current cycle.

EMPLOYMENT

A

The US economy added 196,000 new jobs in March, helping to alleviate concerns from an unexpectedly weak February report. Encouragingly, we have also observed some healthy wage growth, which is currently above the rate of inflation.

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 we see the potential for an increase moving forward. This metric deserves our attention.

OTHER CONCERNS

INTERNATIONAL RISKS

5

The above ratings assume no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 5. These risks deserve our ongoing attention.

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 a recent bounce back in existing home sales suggests that households are still willing to make large purchases, which bodes well for the economy and for markets.

FED POLICIES

C+

(Upgraded from C-) Following its March meeting, the Federal Reserve signaled to markets that it may not hike interest rates during 2019, and plans to halt its balance sheet reductions. The Fed’s future actions will remain data dependent, but the contractionary policies that have dominated the last two years appear to be on pause.

BUSINESS PROFITABILITY

B-

(Downgraded from B+) Corporate earnings remain strong, but we anticipate earnings growth will taper off in 2019. According to Facset, the expected earnings growth rate for S&P 500 companies during 2019 is around 4%. This is below the long-term average for the current cycle.

EMPLOYMENT

A

The US economy added just 20,000 new jobs in February, which was far less than expected. This was the weakest number since 2017, but job gains from both December and January were revised upwards. Despite the weak report, the labor market remains one of the strongest components of the economic backdrop at this time.

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 we see the potential for an increase moving forward. This metric deserves our attention.

OTHER CONCERNS

INTERNATIONAL RISKS

5

The above ratings assume no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 5. These risks deserve our ongoing attention.