Executive Summary

The S&P 500 is having difficulty keeping its head above water this year. While fundamentals are conducive for growth, policy uncertainties related to trade are keeping investors off balance. White House turnover personifies capricious leadership.  Blue chips are a scant 5% overvalued relative to 12-month forward earnings and dividends.

Economic growth is broadening worldwide, thanks to stimulative monetary policies and corporate tax reductions domestically. We anticipate a boost in business spending and capital expenditures.

Liquidity, while positive, is under pressure, owing to increases in stock and bond market volatility and yen strength. The availability of credit, however, remains robust. Credit spreads are narrow and the willingness of banks to make loans is accommodative.

Investors, reacting to global uncertainties and recent volatility have downgraded their outlooks from bullish to neutral in recent weeks. This is in stark contrast to overwhelming bullishness exhibited at the beginning of the year.

Technical conditions deteriorated in the downturn but remain positive both at home and abroad. The has S&P 500 bounced off of its 200-day moving average twice over the last two months and rebounded.

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