Insight

Commentary

CBO – Tax Benefits and Debt Red Flags

We take a look at the key forecasts of the Congressional Budget Office in the agency’s recently-published “Budget and Economic Outlook: 2018 to 2028”. Here we review the CBO’s assessment of the new tax plan and its impact on the U.S. economy and the balance sheet of the federal government. In addition to highlighting the CBO’s GDP, inflation and interest rate forecasts, we also evaluate what is the agency’s concerted effort in warning about the material trajectory of projected federal debt.

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U.S. Housing Decelerating

Some recent financial press has highlighted the latest developments in U.S. housing data, and pointed to modest weakness in the latest numbers. In this report, we take a look at some key figures and briefly cover what appears to be some slight softening in the U.S. housing sector. While the current view does not present any material red flags, the future trajectory of housing data could prove to be important for how economists and investors think about medium-term business cycle conditions.

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Political Risk in the U.S.

There has been a lot of talk about trade policy risk as it relates to recent moves/comments from the current administration. We put this aside for a moment and take an even broader look at U.S. political risk and site some telling data from Coface and the World Bank. The thesis will shed some light on the increasing importance of political risk when it comes to assessing U.S. risk asset exposure.

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A Short Conversation; A Long Look

A recent talk with an investment colleague quickly lead to a discussion of the inner-workings of the Trump rally and the state of the market. We recalled the prescient words of Sir John Templeton as he put the context of a market cycle in one short sentence. Where are we in that market cycle? And, are we embarking on a new secular bull market? A chart may help tell the story, although history's constant evolution between progressivism and capitalism may in fact hold the key.

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The New Inflation

We offer an important look at structural variables likely contributing to sustainably low inflation readings. From here we discern that goods and services price increases are likely to remain constrained despite U.S. Unemployment readings well below 5%. This should cause many investors to recalibrate the views on monetary policy and interest rates.

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The Importance of Downside Protection Strategies

Losing money is often the biggest concern for investors and too often this fact is overlooked by much of the investment community. In this report, we show how risk-mitigating strategies that may beat benchmarks in the bearish years could keep investors from having to chase returns in the bullish years. We believe this concept may enhance financial market wealth creation over time. Recent data shows that employing investment strategies successful at materially outperforming benchmarks in the down years may help portfolios outpace the equity market over the long-term.

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