Heritage Market Brief – March

Each month, our Heritage Investment team publishes a market brief to provide an overview of the major factors influencing the US economy, including a summary of key sectors and the current positives & challenges.

Click here for the March 2016 update.

Here are some key highlights:

POSITIVES

  • While the February ISM Manufacturing Index reading of 49.5 remains in contractionary territory for the 5th straight month, the index reported a moderate increase driven by improvement in production and employment.
  • Consumer strength continues to improve with year-over-year wage growth up 4.5%, year-over-year spending up 4.2%, and savings unchanged at 5.2%.
  • Inflation pressure is building as core PCE increased 1.7% year-over-year and average hourly earnings increased from 2% to 2.5% over the last 6 months.
  • Spillover of widening credit spreads within the energy sector into very high investment grade corporate energy bonds has allowed us the opportunity to selectively add to bond ladders.

CHALLENGES

  • Even with many U.S. oil companies planning to cut production by 10% in 2016, oil dependent states and countries will likely remain challenged by depressed prices as OPEC continues to ramp up production.
  • While the U.S. dollar seems to have stabilized for now, monetary policy divergence between the U.S. and the rest-of-the world will likely continue to impact world trade and could result in further U.S. dollar strength.
  • Global interest rates remain historically low.