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Economic Commentary: Q4 2019

Autumn breezes: Change in seasons — and markets
The return of fall offers cooler temperatures—but a shifting market environment. Dovish central bank policies may extend the long economic expansion, but against a backdrop of rising geopolitical tensions and trade disputes contributing to slower growth. Investors are responding by seeking to boost portfolio resilience to withstand volatility. Our take on the major investor themes for the weeks ahead:

U.S. equities: Technology: The cyclical versus the secular
With the economy in the late stages of the business cycle, we continue to favor a moderately pro-risk posture in U.S. equities. Technology remains one of our preferred sectors, but it is important to recognize that some sectors are more tied to the business cycle (like semiconductors), while others may benefit from long-term tailwinds (like software).

Developed markets: Upgrading Europe
We are upgrading the region from underweight to neutral. The European Central Bank’s fresh monetary stimulus could provide a tailwind for equities. We believe the negative sentiment toward the region may be overdone (while recognizing obvious risks) when comparing Europe’s risk to emerging markets and its valuations to U.S. equities.

Emerging markets: Latin America in focus
We have downgraded emerging markets to neutral, but we see opportunities in Latin America. Valuations are attractive for many of the region’s economies compared to other emerging markets, particularly with respect to earnings expectations. We are not sanguine about the risk of trade tensions but note that easing financial conditions and progress on political reform have already helped drive asset prices this year.

Fixed income: Navigating the fall in rates
The Federal Reserve’s 180-degree pivot from rate hikes to rate cuts has had a significant impact on fixed income markets. Still, we believe this is an important time to strengthen the ballast in one’s portfolio through quality fixed income investments, namely investment grade bonds and agency mortgage-backed securities.

Factors: Min vol goes viral
After a challenging start to the year, both minimum volatility and momentum stocks outperformed the broader market in the second quarter. This reinforces how investors are looking to build resilience in their portfolios, while not missing out on market rallies. Min vol valuations appear stretched at this point, while momentum valuations are supportive.
 

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By Lineweaver Financial Group
September 10, 2020 Category: General, Market, Election

Key Points Challenges include elevated virus transmissions, high unemployment levels, the Presidential election and stretched valuation metrics Monetary and fiscal policy combined with vaccine developments are likely to continue to support risk assets 2020: A Historic Year 2020 will be remembered as the year the coronavirus severely tested the basic freedoms and tenets of capitalism in the United States. The virus has proven to be highly efficient in disrupting many of the daily routines we typically take for granted. Like an engine needs clean oil to operate smoothly, the free movement of people, goods, and capital are key lubricants capitalism needs to operate smoothly. The virus is near-perfect friction to this free movement. As we have witnessed, businesses and education systems have difficulty functioning without free movement. Unfortunately, we have also felt the human tragedy the virus has created with nearly 775,000 deaths globally,5 a number that will sadly go higher. For

Q2 and Three Steps to Take

By Lineweaver Financial Group
August 06, 2020 Category: Strategies, Volatile Market, General

The second quarter of 2020 is unlike any other. Weve been in the midst of a global pandemic that led to the stay-at-home mandates that caused a sharp, deep recession and left nearly 20% of Americans unemployed1. In May and early June, after many thought the curve of new coronavirus cases had been successfully flattened, economic reopening occurred across the country. However, within weeks the virus spread and the US entered the July 4th weekend reporting record numbers. With some progress reportedly being made on several treatments and potential vaccines, many people have started pricing risk assets as if the worst of impact from COVID-19 is over. This was before the onset of what many are calling the 2nd wave of new coronavirus cases, causing many to question the pace of any economic recovery. With expectations that the Federal Reserve will do whatever it takes to support the economy and risk assets investor attention has turned to Congress, as the $600 weekly unemployment benefit

Economic Commentary 2020Q3

By Lineweaver Financial Group
July 16, 2020 Category: Economic Commentary, 2020Q3

Summer is here: Making lemonade out of lemons The great poet Ralph Waldo Emerson famously wrote, Do what we can, summer will have its flies. As we head into the summer months, this mood may best describe nervous investors who recently experienced large bouts of market volatility due to the spread of the coronavirus. The SP 500 Index fell 34% from its all-time high reached on February 19 to its low on March 23. While it has recovered since then, we are seeing global economic activity reflects the implementation of mandatory shelter-in-place policies. Simultaneously, extreme moves in the oil market with West Texas Intermediate (WTI) oil futures prices at one point trading in negative territory due to fears of oversupply caused additional distress in markets. Globally, central banks and governments stepped up to provide unprecedented levels of stimulus measures on both the monetary policy and fiscal fronts. We see three investment implications from this stimulus. First, we would like

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