Evolving data
This week, we notice a change in several datapoints that we follow. We often discuss purchasing manager diffusion indices in the Outlook. These indices are survey data that describe business conditions in various sectors and countries based on expectations of managers. The indices are scored off a base of 50. A reading above 50 indicates an expanding or constructive business environment while a reading below is contracting.
There was a slew of this data released this week and we noticed that Europe has improved dramatically. Most countries there are now in expansionary mode, as are other major economies in Asia. This comes as a bit of a surprise to us. When we last wrote about this data, we assumed that we would see a deterioration as spring progressed and the survey data began to capture the impact of the US administration’s tariffs. Figure 1 presents the data and other than Canada (which is a significant negative outlier with the lowest composite number in the G20), you can see the general global expansion. Figure 2 presents the same data for Europe only and you can see that the data has stabalized. Another item to note was the US ISM Services Index which slumped into contraction territory this week, much lower than market expectations.
We also received employment data that was not particularly good. The ADP number was a huge miss. Estimates were for 114k jobs added but there were only 37k. This index is not known for its quality as it leads into the Monthly Non-Farm Payrolls data, which was released this morning and came in as expected. The ECB lowered its administered interest rates and after the ADP report, the US Administration attempted to pressure the US Fed to do the same. This, of course, was not well received by the market as the independence of the US Federal Open Market Committee is one of the pillars of finance that keeps the global financial system stable.
“This means that” we are intrigued by the improvement in Europe and wonder if this is the beginning of “green shoots” for their economy. The numbers from Canada continue to confirm how difficult it will be for our economy.
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Changes in Leverage. We are increasing the asset ceiling to 2.0 times the market value of equity for Pathfinder International Fund and Pathfinder Conviction Fund to be consistent with Pathfinder Partners’ Fund and Pathfinder Resource Fund.
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*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Partners’ Real Return Plus Fund are presented based on the masters series of each fund. The Pathfinder Core: Equity Portfolio and The Pathfinder Core: High Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder Core: Equity Portfolio (January 2011), Pathfinder Core: High Income Portfolio (October 2012) Partners’ Fund (April 2011), Partners’ Real Return Plus Fund (April, 2013), and Partners’ Core Plus Fund (November 2014).
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