Weekly Economic Update

Posted on December 22, 2014 by LSAConnect

Economic Update 12-22-2014

  • Last week’s domestic economic data were mixed.  Good news came from the stronger industrial production report in November and lower than expected jobless claims.
  • Disappointing news came from December’s Empire manufacturing report, slightly worse than expected housing market data and November’s soft CPI report.
  • Stocks rebounded significantly from the prior week’s slump, as depressed energy prices showed some signs of stabilization, the U.S. economy continued to strengthen, and the Fed expressed patience regarding the timing of rate liftoff.  However, bond performance was muted.  REITs delivered small positive returns that were offset by negative performance from the commodity markets.

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Year End Portfolio Update

Posted on December 18, 2014 by LSAConnect

Year End Portfolio Update

December 18th, 2014

12-18-2014 3-11-05 PM

LSA has posted the year end portfolio update report.  Here were some of the high level thoughts:

As 2014 begins to wind down it is important to reflect and recap how portfolios did in 2014.  In large part 2014 was a story of two tales.   The first half of 2014 sent a shock through the fixed income markets as interest rates retreated to levels many experts believed would not have been seen again for years to come.  This initial positive to the fixed markets set the stage for a second half of the year that would not only bring volatility back to the markets but also attempt to lock in a fair value in a world without quantitative easing.  The equity markets started to realize the dislocation that has been building for the last two years as we finally saw the second half of 2014 generate divergence in returns among cap size.  To listen to the full video recap from 2014 and LSA’s high level outlook for 2015 visit the LSA website and login.  The video replay and presentation can be found under “Resources/Training/Portfolio Update.”  If you are not a member but would like to review the report e-mail us at support@lsaportfolios.com .

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Fed Update

Posted on December 17, 2014 by LSAConnect

Fed Update:

 

The FOMC finished their final meeting of the year today, and offered no substantive changes now that the taper has already completed and there isn’t much to tweak—other than raise interest rates, which they didn’t do (no rate increases were expected).

The part being most closely watched now is the language, notably the potential removal of ‘considerable time’ from the official statement—which was reworded a bit with a new emphasis on ‘patience.’  There were other adjustments, but the general spirit was dovish, even if not as dovish as previously.  (The equity market reaction was strongly positive to this, implying worries about the statement being potentially more hawkish than it was.) Continue reading →

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Chart(s) of the Week: The Currency Crisis in Russia

Posted on December 17, 2014 by LSAConnect

Chart(s) of the Week: Currency Collapse in Russia

 russian-ruble-and-benchmark-interest-rate-ruble-vs-dollar-performance-central-bank-key-interest-rate_chartbuilder

Due to plummeting oil prices and economic sanctions, the Russian ruble has lost about half its value to the dollar this year, losing about a quarter of that in the last week alone. Hoping to reverse this downturn, on Monday the Russian Central Bank raised interest rates to 17 percent from 10.5 percent. To Russia’s dismay, this move has only increased panic in the market. After a brief rally early Wednesday on news that the Finance Ministry will sell foreign currency reserves, the ruble continues to weaken.

ruble oil tres

If the central bank cannot gain control on its currency, Russia is poised for a recession, adding another headwind to the global economy. Investors are piling into safe havens as these global concerns continue to increase, pushing the 10 year Treasury yield to 2.07%, its lowest since May 2013.

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LSA Manager Interview with Ty Powers from Hatteras

Posted on December 16, 2014 by LSAConnect

LSA Manager Interview with Ty Powers Portfolio Managers with Hatteras:

 hat

TY POWERS, CFA
DIRECTOR, PORTFOLIO MANAGEMENT

Mr. Power’s primary responsibilities include manager research for the Hatteras Alternative Mutual Funds including hedge fund manager sourcing and due diligence. Prior to joining Hatteras, Mr. Powers was a senior analyst at Brightleaf Capital, a long/short equity hedge fund. His responsibilities at Brightleaf included fundamental security analysis, financial modeling, and stock selection. Mr. Powers previously worked at BB&T Capital Markets as an Equity Research Analyst covering the specialty finance sector. He also spent several years at Deutsche Bank Alex. Brown, most recently as Vice President in the firm’s High Net Worth Private Client Division. Mr. Powers received his Bachelor of Arts degree in Economics from Washington and Lee University and his Master of Business Administration degree with a concentration in Investment Management from the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill. Mr. Powers has also earned his designation as a Chartered Financial Analyst (CFA).

LSA has been utilizing the Hatteras Long/Short Debt fund since June of 2013.  The fund was targeted as a hedge against rising interest rates.  The reversal of the rates in 2014 caused a difficult third quarter for Hatteras and the purpose of this call was to address the lagging performance we have seen since July of 2014.

The private LSA manager interview is now available online for active members only.  To view the LSA interview with Mike and Ty go to www.LSAportfolios.com and login.  The interview is posted under “Resources/LSA Manager Interview”.

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Weekly Economic Update

Posted on December 15, 2014 by LSAConnect

Economic Update 12-15-2014

  • The economic releases were focused on retail sales (which came in as a slight positive surprise), and several sentiment surveys, which also came in more positively than expected. However, oil prices were the most closely watched and discussed indicator of the week.
  • Stocks were significantly lower on the week globally, due to concerns over the repercussions of lower energy prices and forward-looking demand. S. investment-grade bonds gained with lower interest rates in a risk-off week, while riskier bonds sold off.  Real estate fared well, however.

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Chart of the Week: Is the Decline in Oil Prices Renewing Deflationary Concerns?

Posted on December 10, 2014 by LSAConnect

Chart of the Week: Is the Decline in Oil Prices Renewing Deflationary Concerns?

inflation expectations

As oil prices continue their near 40% decline over the past few months and the global economy remains weak, inflationary expectations are beginning to experience their biggest decline since the 2008 recession. Does this mean it is time to worry about deflation? Not necessarily. According to a study by the Cleveland Fed, although oil prices can help explain short-term CPI movements, they do not help forecast core CPI inflation. Though pairing declining oil prices with a weak global economy can be a cause of concern, these factors do not outshine the current stability in core inflation and recent positive employment numbers that push back deflationary pressures. Also, this particular drop in oil prices is being influenced more so by the increase in supply as opposed to the decrease in global demand, making it more unlikely to be a contributing cause to deflation.

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Weekly Economic Update

Posted on December 9, 2014 by LSAConnect

Economic Update 12-08-2014

  • Several key economic reports came through last week, including better-than-expected ISM Manufacturing and Non-Manufacturing reports,
  • Stock markets in the U.S. were generally higher on the week on better economic and employment situation report news, while bonds suffered under higher interest rates. Foreign equities and debt were mixed.

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Chart of the Week: US Manufacturing Renaissance

Posted on December 4, 2014 by LSAConnect

Chart of the Week: The U.S. Manufacturing Renaissance

 manufacturing

Despite the negative sentiment coming from the media, US manufacturing activity is at better than three year highs with no signs of slowdown. Although this sparks more optimism for the U.S. economy and equities, China and Europe, meanwhile, continue to fall behind.

-Source: Blackrock Investments http://ow.ly/Fm4kE

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Weekly Economic Update

Posted on December 1, 2014 by LSAConnect

Economic Update 12-01-2014

  • Despite a holiday-shortened week, there were several major releases—the more important of which surprised a bit on the upside. S. GDP was revised substantially higher from the first estimate while other releases, such as durable goods, PMI and claims were mixed.
  • Equity markets ticked higher with lower volatility than we’ve been used to in recent months. Interest rates fell, pushing domestic bonds higher as well.  The biggest news was the almost -15% drop in crude oil prices, which affected energy stocks, commodities and oil export-heavy nations.

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Weekly Economic Update

Posted on November 24, 2014 by LSAConnect

Economic Update 11-24-2014

  • A busy week of economic data releases: modest weaker industrial production and below consensus expected capacity utilization in October; absent deflationary risk, both domestic PPI and CPI in October came in slightly above the consensus expectation, but remained within the Fed’s inflation target.
  • Mixed housing market data in October showed disappointing housing starts with stronger building permits number and an upside in existing-home sales.
  • U.S. job markets continued to slowly improve as initial jobless claims stayed below 300k for the tenth week, the first such stretch since 2000.  The 4-week moving average of continuing claims fell to its lowest level since January 2001.
  • Fueled by major central banks’ further monetary easing commitments, global equity markets were generally up with EM outperforming domestic equity and EAFE stocks.

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Weekly Economic Update

Posted on November 17, 2014 by LSAConnect

Economic Update 11-17-2014

  • Economic figures last week were a bit better than expected, highlighted by a slight positive surprise in retail sales and decent sentiment surveys, which continued to post readings at high levels.
  • Equity markets were just slightly higher on the week in one of the less volatile set of sessions in several weeks. Domestic bonds were little changed.  Oil prices continued to fall—affecting commodities markets and raising questions about eventual impacts in other areas.

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