We are encouraged, not intimidated, by US stocks at record highs, and we remain overweight stocks and underweight investment grade bonds.  As we pointed out a year ago, new stock market highs do not necessarily foreshadow a bull market’s demise (The Weekly View, 3/11/13).  February’s employment report suggests that the private sector is strong enough to sustain economic growth as the Federal Reserve continues to taper.  This is consistent with RiverFront’s baseline scenario for the US economy to grow by 2.6% this year; a moderate growth rate relative to post-war history, which we think can be sustained for several years.

David Fuller's view

Here is The Weekly View.

The  US  economy has more long-term advantages than those of any other country, starting with competitive energy prices and an increasing lead in most technologies.

However, the short to lengthy medium-term outlook over the next few years is clouded by uncertainties.  The first of these concerns Vladimir Putin’s aggression towards Ukraine.  Additionally, the US and most other countries are still in the lengthy and gradual recovery process following a severe credit crisis recession.  Wall Street’s stock market valuations, on average, are currently at the higher side of average.  The USA is presently led by an administration that is more interested in and knows more about the redistribution rather that the creation of wealth.  These factors are not conducive to significant additional stock market gains on Wall Street this year, despite the USA’s appeal as a safe haven, where equity prices are still supported by a very strong monetary tailwind.