Loading…

Flash Player 9 (or above) is needed to view presentations.
We have detected that you do not have it on your computer. To install it, go here.

Like this presentation? Why not share!

Like this? Share it with your network

Share

Purpose. Passion. Performance. Trusco Capital Management, Inc.

  • 565 views
Uploaded on

 

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
565
On Slideshare
565
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
2
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. Trusco Capital Management, Inc. Economic Update and Outlook May 23, 2007 Alan M. Gayle Senior Investment Strategist Director of Asset Allocation 804-782-5273 [email_address] This perspective was prepared for clients and prospective clients of Trusco Capital Management, Inc.  Neither Trusco Capital or any affiliates make any representation or warranties as to the accuracy or merit of this analysis for individual use.  Past returns are not indicative of future results. Comments and general market related projections were based on information available at the time of writing, are for informational purposes only, are not intended as individual or specific advice, may not represent the opinions of the entire firm, and may not be relied upon for future investing. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decisions.
  • 2. Outline
    • Economy losing momentum.
    • How fast can the consumer grow?
    • Housing market blues.
    • Businesses are profitable but slowing as well.
    • The importance of trade.
    • Federal deficit.
    • What’s up / down with inflation?
    • Fed policy perspectives.
    • Comments on the Florida economy.
    • The outlook.
  • 3. Economy losing momentum Leading Indicators Index Leading Indicators (YOY%)
  • 4. Real GDP - 3.4% Trend Since 1961 Real GDP (YOY%)
  • 5. Real PCE - 3.6% Trend Since 1961 Real Personal Consumption Expenditures as Proportion of GDP Real Personal Consumption Expenditures (YOY%) Sources: BEA, Trusco Capital
  • 6. Job Creation Positive but Weaker Average Hourly Earnings (YOY%) All Employees: Total Nonfarm (Monthly Change 000s)
  • 7. Post-Easter Sales & Sentiment Weaker Retail Sales & Food Services (YOY%) University of Michigan: Consumer Sentiment
  • 8. Auto Sales Softening Domestic Light Vehicle Sales (SAAR, Mil.) Domestic Light Vehicle Sales (SAAR, Mil.)
  • 9. Real Structures Investment – 1.6% Trend Since 1961 Real Structures Investment as a Proportion of GDP Real Structures Investment (YOY%) Sources: BEA, Trusco Capital
  • 10. Real Residential – 3.0% Trend Since 1961 Real Residential Investment as a Proportion of GDP Real Residential Investment (YOY%) Sources: BEA, Trusco Capital
  • 11. Housing Market Soft New + Existing Home Sales (000s) Housing Starts (000s) Sources: NAR, Census
  • 12. Excess Supply Caused Weak Pricing New 1-Family Houses For Sale: Months Supply Existing 1-Family Home Median Sales Price (YOY%)
  • 13. Excess Supply / Softer Prices / Greater Affordability Housing Affordability Index New 1-Family Houses for Sale (Months Supply)
  • 14. Real GPDI - 4.8% Trend Since 1961 Real Gross Private Domestic Investment as a Proportion of GDP Real Gross Private Domestic Investment (YOY%) Sources: BEA, Trusco Capital
  • 15. Company Profits Growth Suggests Strength ISM Employ. Index Corporate Profits with IVA and CCAdj (YOY%)
  • 16. Production Growing More Slowly Industrial Production (YOY%) ISM Mfg: Production Index
  • 17. New Orders Picking Up Slightly N-D Capital Gds X-Aircraft (YOY%-Line) ISM Mfg: New Orders Index
  • 18. Inventories Low, but Additional Trimming Likely Inventory/Sales Ratio Inventories: Total Business (YOY%)
  • 19. New Orders Slowing / Inventories Higher Inventory / Sales Ratio Orders for Nondefense Capital Goods ex Aircraft (YOY%)
  • 20. Trade Expanded from 10% to 30% of GDP! Real GDP (1970=100) Real Imports + Real Exports (1970=100) Source: BEA
  • 21. Trade Deficit Wider but Export Growth Healthy Deficit (Mo. $Bil.) Exports: Goods and Services, BOP Basis (YOY%)
  • 22. Exports Growing Faster in Percentage Terms Exports (YOY%) Imports (YOY%)
  • 23. Dollar Weaker but Not Against Yuan Nominal Trade-Weighted Exchange Value of US$ vs. Major Currencies People's Republic of China Yuan/US$
  • 24. China Imports Now 16% of Total China Imports / Total Imports (12-month Moving Avg.) Source: BEA
  • 25. Real Gov't. Spending - 2.3% Trend Since 1961 Real Government Consumption Expenditures & Gross Investment as Proportion of GDP Real Government Consumption Expenditures & Gross Investment (YOY%) Sources: BEA, Trusco Capital
  • 26. Increased Receipts Trimming a Large Federal Deficit Receipts: 12-mo. Mov. Total Federal Surplus {+} or Deficit {-} (12-month Moving Total Mil.$)
  • 27. Inflation Too High but Moderating CPI (YOY%) Core PCE (YOY%)
  • 28. Energy Prices: Inflationary or Restraining Force? WTI Oil ($/Barrel) Retail Gasoline Price (Cents/Gallon)
  • 29. Behind the Math: A Closer Look at the Yield Curve 10-Yr. Treasury Yield – Federal Funds Rate (%) Composite Index of 4 Coincident Indicators (YOY%) Sources: Conference Board, FRB
  • 30. Credit Still Ample: Private Equity “Put” Corporate BAA Yield – Corporate AAA Yield (Inverted Scale) Composite Index of 4 Coincident Indicators (YOY%) Sources: Conference Board, FRB
  • 31. Absolute Rate Levels Remain Historically Low Federal Fund Rate (%)
  • 32. Total Employment Growth
  • 33. Total Unemployment Rate National Average 4.4
  • 34. Total Building Permits
  • 35. Florida Economic Update - 1
  • 36. Florida Economic Update - 2
  • 37. Florida Economic Update - 3
  • 38. Florida Economic Update - 4
  • 39. Florida Economic Update - 5
  • 40. 2007: Slower Growth with Moderating Inflation Economic momentum slowing due to weak housing and slowing profits growth. Moderate job gains are the key driver at present. Fed policy currently steady due to uncomfortable inflation levels, but ease is possible if slower growth persists. The dollar is expected to remain under downward pressure over the near-term. This perspective was prepared for clients and prospective clients of Trusco Capital Management, Inc. Neither Trusco or any affiliations make any representation or warranties as to the accuracy or merit of this analysis for individual use. Past returns are not indicative of future results. Comments and projections were based on information available at the time of writing, are for informational purposes only, are not intended as individual or specific advice, and may not be relied upon for future investing. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decisions.
  • 41. Perspectives on Growth, Inflation, Profits, & Rates Real GDP (YOY%) S&P 500 Op. EPS (YOY%) Fed Funds (%) CPI (YOY%) Trailing P/E Ratio 10-Yr. Treas. (%) Sources: Trusco, BEA, FRB, S&P, Blue Chip Financial Forecasts
  • 42. Outlook
    • Economic growth expected to continue at a sub-average pace. Recession probability higher but less than 50/50. Job growth is the key economic driver currently.
    • We expect housing will remain soft into 2008 and we are monitoring the potential for contagion into other areas of the economy. Overall, we believe the pace of consumer spending will soften a bit further.
    • CAPEX growth is likely to slow as well due to slower profits growth. Lower, more realistic corporate earnings forecasts have reduced some valuation risks. Fed policy is on hold, but could shift toward ease if economic momentum continues to slide.
    • Core inflation remains a focus for policymakers, but is likely to trend somewhat lower this year.
    • “Data-dependent” / “Forecast-dependent” - Economic volatility around slower growth rates will help generate market volatility.
    • Florida has enjoyed above average growth, but the current housing stress is likely to negatively impact revenue growth.