presented by steve skalka investment manager horizon bank
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Presented By: Steve Skalka Investment Manager Horizon Bank General Economy What is GDP? Gross Domestic Product equals the total value of Goods Produced Services Provided In a Country During a specific time period Growth Has


  1. Presented By: Steve Skalka Investment Manager Horizon Bank

  2. General Economy What is GDP?  Gross Domestic Product equals the total value of  Goods Produced  Services Provided  In a Country  During a specific time period

  3. Growth Has Improved * Great Recession ended June 2009

  4. Some Comparisons

  5. What is Driving Growth?  Fiscal Policy  1) Tax Cuts  Corporate (35% to 21%)  Individual (slightly lower rates and higher standard deduction)  2)Increased Government Spending (increased hiring and purchases)  3) Foreign Corporate Profit Repatriation $700 bn in 2018 (Paying down debt, unfunded pension obligations, share buybacks, dividends, capital expenditures)  Combined fiscal boost estimated to be $1 Trillion over next few years  Perspective – 2017 U.S. GDP about $19 trillion

  6. What is Driving Growth?  Low unemployment rate (September 3.7%)  Starting to see some signs of wage inflation (Amazon)  Interest rates while higher still accommodative from historical perspective  Tame inflation  Decreased government regulation

  7. What is Driving Growth?  Confidence

  8. Will Higher Growth Last?  Fiscal Policy

  9. Will Higher Growth Last?  The boogey man in the closet

  10. Will Higher Growth Last?  What if Democrats take the House and/or Senate?  If Trump has a hard time working with the Republicans how will he work with the Democrats?  Common Ground  Trade  Infrastructure Spending

  11. Will Higher Growth Last?  Interest Rates

  12. Will Higher Growth Last?  Inflation

  13. Will Higher Growth Last?  Tariffs

  14. Conclusion While the fiscal policy spiff should keep us above 2% in 2019 we need a new growth driver in 2020.  New fiscal stimulus?  Corporate capital expenditures?

  15. Domestic Equity Market Domestic Stock’s Had Been Doing Well

  16. U.S. Equities Fairly Priced

  17. 2018 skewed by Corporate Tax Cut

  18. U.S. Stock Market Outlook  Valuations limit the upside  Earnings growth comps will be tough (Need to focus on EBITDA)  May have to look beyond U.S. markets in 2019

  19. A Positive Note

  20. Fixed Income Outlook ( Cd’s, US Treasuries, Corp. Bonds, etc.)  Key Concept

  21. Interest Rate Drivers  1-3 year maturity  Fed Funds Rate (Overnight lending rate between banks)  3 year plus maturity  Inflation and/or inflation expectations

  22. Rate Outlook

  23. Base Case Forecast  Strong economic growth carrying into 2019  Inflation rising but contained  December rate hike  Only two more hikes in 2019  Softer Fed Rhetoric surrounding December meeting  10 Year Treasury topping out at 3.30%  This scenario should avoid an inversion

  24. The End

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