Quarterly Investment Outlook: January 2019


· The US recession indicators that we monitor show no imminent signs of danger, although domestic economic growth is likely to decelerate to 2.5% as we enter 2019. We believe that the selloff since September is a sharp and violent correction, not the beginning of a bear market.

· Fears of a yield curve inversion have been overhyped by the financial media, exacerbating Wall Street's sense of despair.  Inversions since 1978 have been accurate forecasters of recessions, however economic contractions typically occur with a lag of almost two years.  Moreover, since the late 1970s inversions have never marked a peak in the bull market, but instead signal the beginning of the final risk-on phase that has generated average equity returns of 25.2%.

·  Investor sentiment is washed out.  The current reading from the State Street Investor Confidence Index is at a low that has only been matched twice in the last decade.  From a contrarian perspective this level of fear may indicate that the market's path of least resistance is higher.

· The Congressional Budget Office's (CBO) projection of deficit spending continues to deteriorate.  Moreover, an analysis performed by Hoisington Management highlighted the CBO's estimates have significantly underestimated the rate at which the federal government's debt balance has grown.  Our analysis indicates that a recession by yearend 2023 could increase the level of Federal debt to GDP from 107% currently to 129% by 2024.

· This issue marks the introduction of the Portfolio Additions section, which highlights the investment rationale behind Stuyvesant's recently added core holdings.  In this issue we discuss Las Vegas Sands Corp., Paccar Inc., and The Chemours Company.

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