The PIMCO All Asset All Authority funds has been a top performing fund (in both good and bad equity markets) for nearly a decade and is a cornerstone investment for many of our clients’ portfolios. In his November 2012 report Mr. Arnott talks about the dominant themes driving his portfolio positioning as well as his views on the economic environment ahead. If you are interested in learning what one of the brightest economic minds in finance is thinking I encourage you to read this piece by CLICKING HERE.
Archive for November, 2012
Housing, once the bane of the U.S. economy, is now a bright spot. Home sales and prices are up while inventory is down to a 5.4 month supply – the lowest since February 2006. Year-over-year sales have increased for eight consecutive months and previously owned homes listed for sale are at the lowest level since December 2002.
However, corporate profits are moving in the opposite direction. The blended earnings growth rate for Q3 is currently -0.9% and only 41% of those companies met or exceeded revenue expectations. The Euro Zone crisis is still having a deep impact on large multinationals.
Despite weakened earnings, the stock market crosed some key psychological thresholds last week with the Dow finishing above 13,000 and the S&P 500 over 1400 . Perhaps there is some comfort in continuity, advancing the idea that the market tends to respond well when there is less uncertainty – even if the news isn’t all that great.
To read the full article on this topic please CLICK HERE.
“When a nation has engaged in financial irresponsibility for decades, it is extremely difficult for politicians – who gloss over deficits and point fingers at each other – to reverse course and begin the painful steps needed to redress failed fiscal policies. It’s even more chalenging when it calls for shedding deeply held positions on taxation and spending reductions.” – Peter Lefkin
To learn more about the expiring tax breaks and automatic spending cuts scheduled to take effect at the end of 2012, including the forecasted economic impact and where Democrats and Republicans stand please CLICK HERE.
Investor fears about going over the “fiscal cliff” may be exaggerated. A more tangible threat is the weakening U.S. economy. Earnings are declining, manufacturing has slowed and companies may reduce reinvestment and rehiring. According to this article from Allianz Global Investors “the chances of [the fiscal cliff] actually happening in its entirety are slim.
However, if allowed to occur all at once, it could put an estimated 4% dent in GDP and increase unemployment to 9.1%. Taxpayers would face the largest take hike in U.S. history, an average of $3,500 per household, as estimated by the Tax Policy Center.
The structural issues of U.S. fiscal policy notwithstanding, investors should focus on more concrete risks to their portfolio. Europe is still steeped in crisis; China’s meteoric rise is slowing and there exists erosion of fundamentals at home and abroad. Low interest rates and low growth mean real returns matter.
To read more about the fiscal cliff and its overshadowing of current fundamentals please CLICK HERE.