Description
consensus outlook is for annual growth of 2.5 - 3% in 2015 with Europe delivering significantly
slower growth and emerging markets remaining under stress.
Increased interest rate spreads over treasury securities have signaled that risks are climbing.
These higher rates for corporate credit and high yield bonds notwithstanding, we view the
present level as richly priced by comparison to equities.
We continue to anticipate a tepid growth environment and continued volatility in the capital
markets as international macro-economic relationships adjust while central bank polices support
recovery. The equity markets are presently working through their own repricing of risk and
though volatile are trading within a range that will be more supportable by anticipated 2016
corporate earnings, resulting in lower PE multiples for equities.
Postscript
Two days after the close of the quarter (yes, it is October) capital markets awakened to
disappointing news with regard to the U.S. economy. Nonfarm payrolls in September increased
by only 142,000 jobs as compared to the forecasted 206,000 jobs.
August jobs numbers were revised downward to 136,000 jobs from the initial reading of 173,000. July was also revised down to 223,000 jobs from the initial reading of 245,000. Wage increases in September were flat following a 9 cent per hour gain in August.
The unemployment rate remained unchanged at 5.1%. The equity markets vigorously reacted to the disappointing news selling off sharply at the open, only to rally back during the day. Interest rates declined throughout the yield curve with the 10year treasury falling below 2%. Concerns over deflation again came to the fore. The jobs numbers during the third quarter are indicative of a tepid domestic economy and casts doubt on the outlook for earnings in 2016.
Composite S&P 500 earnings from domestic operations thus far in 2015 excluding the energy sector have reflected reasonable growth while earnings from international operations have generally negatively impacted overall earnings growth. We anticipate a gradual and protracted economic and earnings recovery. The above commentary represents the economic and market views of our firm. We remind you, however, that each client’s portfolio is managed individually.
Please speak with your KLS advisor with respect to your personal circumstances and individual portfolio performance. The material contained herein is intended as a general market commentary. The prices/quotes/statistics referenced herein have been obtained from sources deemed to be reliable, but we do not guarantee their accuracy or completeness; any yield referenced is indicative and subject to change. The views and strategies described herein may not be suitable for all investors.
Certain opinions, estimates, investment strategies and views expressed in this document constitute our judgment based on current market conditions and are subject to change without notice. The information contained herein should not be relied upon in isolation for the purpose of making an investment decision. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument.
Past performance is not indicative of future results. October 2, 2015 4 .
August jobs numbers were revised downward to 136,000 jobs from the initial reading of 173,000. July was also revised down to 223,000 jobs from the initial reading of 245,000. Wage increases in September were flat following a 9 cent per hour gain in August.
The unemployment rate remained unchanged at 5.1%. The equity markets vigorously reacted to the disappointing news selling off sharply at the open, only to rally back during the day. Interest rates declined throughout the yield curve with the 10year treasury falling below 2%. Concerns over deflation again came to the fore. The jobs numbers during the third quarter are indicative of a tepid domestic economy and casts doubt on the outlook for earnings in 2016.
Composite S&P 500 earnings from domestic operations thus far in 2015 excluding the energy sector have reflected reasonable growth while earnings from international operations have generally negatively impacted overall earnings growth. We anticipate a gradual and protracted economic and earnings recovery. The above commentary represents the economic and market views of our firm. We remind you, however, that each client’s portfolio is managed individually.
Please speak with your KLS advisor with respect to your personal circumstances and individual portfolio performance. The material contained herein is intended as a general market commentary. The prices/quotes/statistics referenced herein have been obtained from sources deemed to be reliable, but we do not guarantee their accuracy or completeness; any yield referenced is indicative and subject to change. The views and strategies described herein may not be suitable for all investors.
Certain opinions, estimates, investment strategies and views expressed in this document constitute our judgment based on current market conditions and are subject to change without notice. The information contained herein should not be relied upon in isolation for the purpose of making an investment decision. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument.
Past performance is not indicative of future results. October 2, 2015 4 .
