Our view of the market is to trust but verify.

The current economic and market data is empirically sound but we need to be vigilant to detect anomalies and market failures.

Mark Twain once remarked, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

What just isn’t so is the position of the economy in the current cycle. The domestic economy continues to expand and make records as the longest expansion since WWII. Growth is solid in manufacturing and employment but leading indicators have been flat since late 2018.

Internationally there are clues that suggest the negative trend has abated. Political and financial uncertainties are holding back the Eurozone and demographic pressures continue to depress Japan. Conversely, recent stimulus in China may lift many international Markets. These differences are reflected in the persistent divergence of the US with the rest of the world.

Fixed Income markets sing a more synchronized tune as central banks aim to be more accommodative and the US Federal Reserve softens its outlook toward a patient strategy. Yields around the world are significantly lower and inflation rates remain subdued. As a result, the US dollar continues to strengthen and most other economies are weaker than the US.

We continue to be optimistic. There are plentiful investment opportunities but good investing is exploiting what we know to manage both the risks we can see and those that are hidden.

As G.K. Chesterton once noted, “The real trouble with this world of ours is not that it is an unreasonable world, nor even that it is a reasonable one. The commonest kind of trouble is that it is nearly reasonable, but not quite.”