Investment Insights Podcast – August 21, 2015

miller_podcast_graphicBill Miller, Chief Investment Officer

On this week’s podcast, we focus on two important areas of the economy as noted by Economist Don Rissmiller (recorded August 19, 2015):

 

  • Employment:
    • Labor Force Participation Rate (LFPR) often used as a technicality with good or bad unemployment rates
    • However, there’s nothing actually nefarious about the number and (because it is falling) is more a function of baby boomers aging
    • Despite falling, the LFPR does not diminish the success we’re seeing in getting people back to work
  • Interest Rates
    • Fed has interest rates at 0%, so may see a gradual increase up to somewhere around 2%
    • If interest rates do in fact rise, it would behoove the Fed to have them match the inflation rate as to not damage the economy

Overall, the economy feels mid-cycle, people are going back to work, and appear to be in a position to handle slightly higher interest rates.

Click here to listen to the audio recording

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change.

 

Looking Past the Fiscal Cliff

MagnottaAmy Magnotta, CFA, Brinker Capital

It looks like there will be some deal on the fiscal cliff that emerges from Washington before the end of the year—either (1) a large deal that includes a compromise on higher revenues, spending cuts and entitlement reforms, or (2) a smaller deal that results in a larger fiscal drag than consensus currently anticipates. Time is running out, and the market will likely be disappointed if Congress leaves for the Christmas holiday without a more specific plan in place.

In his research report today, Don Rismiller, Chief Economist at Strategas Research Partners, encouraged investors to look through the fiscal cliff and to take notice of the number of good things that are happening in the U.S. economy. Rismiller provided a dozen reasons for optimism after the fiscal cliff is resolved.

The Other Side

Positives on the Other Side of the Fiscal Cliff:

  1. The Fed has followed through on “QE4.”
  2. Additional global easing is expected (e.g., Abe & BoJ, Carney & BoE).
  3. The bond market has digested additional U.S. debt well (10-yr @ 1.8%).
  4. The U.S. dollar has held value (meaning there’s room for policy to operate).
  5. Housing has bottomed in the U.S.
  6. There’s pent-up demand for household formation (buy or rent).
  7. There’s pent-up demand being created for capex (which has already fallen).
  8. There’s likely some pent-up demand for autos (hurricane replacement).
  9. While small, nonresidential construction could increase with hurricane rebuilding.
  10. Domestic energy production continues to ramp up.
  11. Equity valuations look attractive.
  12. Equity multiples bottom before earnings, which is likely an early 2013 story.