Quarterly Investment Outlook: June 2015

SUMMARY

• Dollar strength should fade.
• Fed Bank of Atlanta's GDP tracking model puts 2Q15 growth at 0.8%.  Our base case is the U.S. economy will struggle to grow above 2-2.5%.
• We are revising earnings growth for 2015 to flat from +6%.  Margins are pressured by lack of pricing power and rising wage costs.
• Treasury yields could drift lower over next several months if oil prices reach a plateau and the FOMC members revise their Fed funds forecast ("dots") lower.
• Given that equity valuations are elevated, our portfolio strategy is defensive.  We are seeking alpha in select foreign markets, energy, health care, and financials.  Maintain core position in investment grade corporates.  Hold gold miners as a hedge against market volatility and a weak dollar.

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