Looking good...
This week, we received data that appears to be much more constructive for the economy. Today’s commentary out of “Jackson Hole” was also positive. First, we note that Purchasing Managers Indices (PMI) from around the world have moved to improved (see the discussion below). Second, there was good, constructive economic commentary from Federal Open Market Committee (FOMC) Chair Jerome Powell at the annual symposium held in Jackson Hole, Wyoming. Bankers and economists from around the world attend this meeting annually to discuss the markets and global economy. There is always commentary from the Chair that investors pay close attention too.
- Recall that PMIs are management surveys focused on “the next month’s” outlook. An aggregate score above 50 indicates that management believe their business will expand, while a reading below 50 indicates contraction. Please see Figure 1 which presents PMI data from around the world, that was released earlier this week.
- We note that for the largest global economies, PMIs on a consolidated basis have collectively improved from expected contraction to expected expansion. This is quite constructive. If managements are seeing improvement at the margin, and the central banks are moving to be more accommodative (see FOMC discussion below) then the potential for a soft landing appears to be improving.
- We note that services remain strong around the world and that manufacturing is now starting to improve.
Today, FOMC Chairman Jerome Powell indicated that the time has come for US administered rate policy adjustment. He also concluded that the labour market has cooled significantly and that the FOMC is not seeking any further moderation in employment as a means to decrease future inflation growth. The committee believes that the upside risks to inflation have diminished and that now the downside risk to employment has increased.
“This means that” we are now approaching the period where we will pay very close attention FOMC activity. Chair Powel clearly said today that the time has come for administered rate cuts. He also said the timing and size will depend on incoming data. His expectation is that, with some level of employment support by the Fed, the US will return to 2% inflation while maintaining a strong labour market. If this can happen, and management expectations remain constructive, then we believe our portfolios are very well positioned for the coming growth cycle.
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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.
*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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