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|Thursday, April 17, 2014|
BY JASON NORRIS | OB BLOGGER
A Hazy Shade of Winter
The “polar vortex” of 2014 seems to have finally thawed and we believe this change in weather will bring more sunshine to the U.S. economy as well. Economic growth hit a speed bump in the first quarter as much of the U.S. experienced severe winter conditions. This resulted in lower-than-expected economic activity, which in turn led investors to reduce risk in their portfolios and bid up bonds, leading to a decline in interest rates. We believe this “soft patch” is a short-term phenomenon and have already started to see a pick-up in retail sales and manufacturing activity, as seen in the Purchasing Managers Index (PMI) data in the chart below.
What is PMI and Why Does it Matter?
The Purchasing Managers Index (PMI) is an indicator of the vitality of the manufacturing sector. The PMI Index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and employment. Historically this has proved to be a good leading indicator for future unemployment rates, consumer confidence and the direction of the economy.
In last month’s blog posting, we made mention of the impact of the NCAA basketball tournament on worker productivity. As the polar vortex melts away, there is a new weather-related phenomenon across the U.S. that is making headlines – the pollen vortex. According to the Asthma and Allergy Foundation of America (AAFA), 70 million people suffer from nasal allergies and asthma in the U.S., resulting in $18 billion in hospital visits and lost workdays annually. Although we think the polar vortex will have packed a bigger punch to the economy than pollen, we do empathize with those who are sneezing and wheezing this spring.
While stock market volatility hasn’t hurt consumer confidence, the price of gas may do so in the near future. We have seen a 10 percent increase in gas prices the last two months. Of course commodity prices can be volatile, but if there is a persistent trend higher, it will present an impediment to our bullish view of the U.S. consumer.
This improvement in economic activity has also resulted in more lending from financial institutions. However, there is a bifurcation in lending activity as smaller banks have shown an increased propensity to increase loans (up over 13 percent), while larger institutions have shown muted growth (up 5 percent). The main differential is coming from real estate lending, with smaller banks growing their loan books, while larger banks are still showing declines. Commercial lending for both segments has shown very healthy growth of late. Some of the hesitation from larger institutions may be coming from the increased capital requirements the Federal Reserve has mandated. Fed Chairwoman Yellen has even stated that larger financial Institutions may want to reserve more than the regulators require.
We believe that spring will show a thaw in economic activity, thus we favor equity exposure to the U.S. consumer and financials, especially regional banks and select life insurance companies.
April 15 has come and gone, bringing increased revenues to the U.S. Treasury. On the expenditure side of the ledger, we are also seeing reductions in deficit projections as a result of lower-than-anticipated spending on healthcare and defense. While the U.S. is still spending more than it takes in, at least that difference is declining. For those taxpayers who have a big heart and want “make a difference,” the IRS includes a box on tax forms for filers to check should they want to make a donation to the Treasury. Remember, tax rates are just a minimum requirement! Over the last 15 years, the average annual donation has been around $2 million; however, 2014 has already eclipsed this amount with $2.7 million in additional support to the Treasury. With the strength in equity markets over the last few years, will there be more “giving” to the U.S. government, or will increased capital gains taxes eat into this philanthropic endeavor? We’ll see.
Show Me the Money
April kicks off the first quarter earnings season for 2014 and expectations are for earnings growth of 3 percent (year-over-year). This is down from expectations of 10 percent growth three months ago. We believe this negative revision is a result of extreme weather in the first quarter. We expect second quarter growth to reaccelerate to 9 percent. Though this may prove to be somewhat optimistic, we believe we will see greater-than-5-percent growth in second quarter.
As we move into spring, we would expect U.S. economic growth to continue to pick up, which will be positive for corporate earnings but also result in higher interest rates. That would present a headwind to bond investors.
Jason Norris, CFA, is executive vice president of research at Ferguson Wellman Capital Management. Ferguson Wellman analysts blog on the financial markets for Oregon Business.
Tuesday, December 09, 2014
BY LINDA BAKER
On the eve of the Portland Ad Federation's Rosey Awards, Matt Anderson, CEO of Struck, talks about the transition from creative director to CEO, the Portland talent pool and whether data is the new black in the creative services sector.
Friday, October 24, 2014
A majority of respondents agreed: Local vineyards should remain Oregon-owned and quality is the most important factor when determining where to eat or buy groceries.
Thursday, December 11, 2014
There’s a fascinating article in the December issue of the Harvard Business Review about a profound power shift taking place in business and society. It’s a long read, but the gist revolves around the tension between “old power” and “new power” as a driver of transformation. Here’s an excerpt:
The authors, Henry Timms and Jeremy Heimans, don’t necessarily favor one form of power over another but merely outline how power is transitioning, and how companies can take advantage of these changes to strengthen their positions in the marketplace.
Our Powerbook issue might be viewed as a case study in the new-power transition. This annual book of lists provides information on leading businesses, nonprofits and universities in the state. Most of the featured companies are entrenched power players now pursuing more flexible and less hierarchical approaches to doing business. Law firms, for example, are adopting new technologies and fee structures to make legal services more accessible and affordable.
This month we also take a look at a controversial new U.S. Securities and Exchange Commission rule requiring public companies to disclose the median pay of workers, as well as the ratio between CEO and median-worker pay.
Part of the 2010 Dodd-Frank financial reform law, the rule will compel public companies to be more open about employee compensation, with the assumption that greater transparency will improve corporate performance and, perhaps, help address one of the major challenges of our time: income inequality.
New power is not only about strategy and tactics, the Harvard Business Review authors say. “The ultimate questions are ethical. The big question is whether new power can genuinely serve the common good and confront society’s most intractable problems.”
That sounds like a call to arms. Or a New Year’s resolution. Old power or new, the goals are the same: to be a force for positive change in the world. Happy 2015!
Thursday, November 13, 2014
BY RYAN CARSON | OP-ED CONTRIBUTOR
How do we skill up our future technology workforce in a smart way to take advantage of these high-paying jobs? The answer shouldn’t focus only on helping people get a bachelor’s degree.
Wednesday, November 26, 2014
BY NISHANT BHAJARIA | OP-ED CONTRIBUTOR
By now, anyone who knows about it has a position on President Obama’s executive order on immigration. The executive order is the outcome of failed attempts at getting a bill through the normal legislative process. Both Obama and his predecessor came close, but not close enough since the process broke down multiple times.
Thursday, December 18, 2014
BY JASON NORRIS | OB CONTRIBUTOR
The implosion of the energy complex: The best thing for low oil prices is low oil prices.
Monday, November 10, 2014
BY KIM MOORE | OB RESEARCH EDITOR
A market for low-carbon transportation fuels has a chance to flourish in Oregon if regulators adopt the second phase of the state’s Clean Fuels Program.
|A Complex Portrait: Immigration, Jobs and the Economy|
|Woman of Steel|
|Kill the Meeting|
Is your business ready to join us in the call for action? This opening panel includes Oregon businesses who will discuss why they signed the Oregon Climate Declaration, the investments they are making to reduce carbon emissions, and how their actions are affecting their companies.
Get ready for two days of special events produced with the EPA, Portland Timbers and ISOS before and after the GoGreen Conference on October 16.
How sports tourism is driving economic growth and making cities across Oregon a better place to live.
Port of Morrow's business-ready attitude has a surprising global impact.
Through its support of the arts, the Cultural Trust is strengthening the business community.
Heed the morals of these seminal holiday stories in your everyday life.
Amy will practice in the firm's Business, Real Estate, and Tax practice groups.
While the Bend City Council ultimately upheld the approval which enables OSU-Cascades to move forward with the 10 acre site, it did also thoughtfully consider the nature of its code requirements, resident concerns and OSU-Cascade’s efforts and suggestions and crafted conditions of approval to address potential impacts of the site in the area.