Friends and Colleagues

As we settle into the new political reality, it's time to consider it's impact on the state of the economy.

Please read on for economic insights thanks to the economists at Wells Fargo Securities (WFS).

Where Is Our Economy Going?

Things seem to be rolling along....

  • The US economy expanded 1.4% in Q1, which was greater than expected.
  • Personal consumption rose 1.1% in Q1, which also beat expectations.
  • WFS projects Q2 GDP will get a solid boost from consumption.
  • Consumner confidence is very strong, hitting a cycle high in March.
  • While consumers are disappointed that progress toward policy objectives has been slower than expected, they remain upbeat, particularly about the labor market.
  • Personal income grew 0.4% in May, ahead of expectations.
  • Inflation remains low as the PCE deflator increased only 1.4%, vs. the FOMC target of 2.0%.
  • Manufacturing, while not ramping up significantly, is still faring better than it did a year ago.
  • WFS projects continued slow steady improvement in manufacturing until there is some clarity on fiscal policy.

What's Happening Overseas?

Consumer confidence in the Eurozone is currently booming; however, the economy itself is showing steady growth.

  • The German business sentiment index increased in June to its highest level in 26 years!
  • German consumer confidence just reached a 16 year high.
  • In France, consumer conficence also rose to a 10 year high on the heels of  President Macron's victory in May.  
  • The Italian index of consumer confidence also rose last month.
  • German industrial production rose 2.3% in Feb-Apr vs. last year.  This shows strong, but not booming growth.
  • The Eurozone economy is in its fourth year of expansion and is becoming self-sustaining.
  • Euro-inflation is well below the ECB target of 2.0%.
  • WFS projects the ECB will "taper" its quantitative easing program later in the year and will refrain from raising interest rates until later in 2018.

Interest Rates?

  • WFS suggests current US economic data are "generally supportive" of higher interest rates.
  • Increases in consumer confidence and real GDP growth have the US economy on a positive path, which could suggest rising rates over time.

As always, the only thaing that is constant is change.
And the best way to keep ahead is to keep informed.
So please stay tuned....



Slow Down and Listen

Our world today is fast, fast, fast.
Instant news. Instant feedback.  Instant fans.
Social media is all about saying, "Hey Look at Me!!!"

How much are we missing by spending our time and energy getting people to see us?

We are missing the stories that our loved ones have to share.
Not their tweets or Facebook posts....their real stories....about excitement and pain and fear and goals and worries and.....life.

Life is not a bunch of sound-bytes for the public to see.
Life is about what happens behind those rosy bits of news.

The only way to learn what others are going through is to slow down....and make time for them.  it takes listening...real, heart-felt listening. Not listening, while thinking of what I can say next.  

Listening is an underrated and seldom taught, essential skill.
It requires us to put down the devices, and pay attention...with our ears, our mind, and our heart.

Listen for content.
Listen for tone.
Listen to learn.
Listen to truly hear.

In the days and weeks ahead, let's do the hard work of paying attention with our whole being, when our loved ones and our colleagues are talking.  

We may be surprised what we learn...

Make it a great week!

David Rosenthal, MAI, FRICS
President & CEO
Curtis-Rosenthal, Inc.




Friends and Colleagues

It's a new year and a new administration...and that means change is in the air.

Please read on for insights about the current state of the economy thanks to the economists at Wells Fargo Securities (WFS).

Where Are We Now?

Mixed Economic Activity in the 4th Quarter

  • US GDP growth slowed to a 1.9% rate in in Q4, weighed down by slowing international trade.
  • Domestic sales accelerated to a 2.5% rate, after slowing over the past 6 quarters.
  • Personal consumption slowed to a solid at 2.5% growth rate.
  • Business fixed investment increased at the fastest rate in over a year.
  • Real equipment spending increased to 3.1% after 4 quarterly declines.
  • Residential investment grew at a 10.2% annualized rate after 2 quarterly declines.
  • Government consumption and investment continued its slow growth at a 1.2% pace.

Full-year GDP growth was 1.6% in 2016, matching 2011 as the slowest growth year in this recovery.

Oil prices have rebounded from their 2016 lows, and WFB expects a gradual appreciation from current levels.

WFB projects real GDP to accelerate to a 2.3% pace in 2017 with balanced economic growth.


The Trump Era - Anticipating Change

The Trump administration has promised to improve growth.
What does this mean for the future of financial markets? 

His plan is to increase growth to 3% or greater through a combination of:

  • Tax cuts
  • Infrastructure spending
  • Less regulation

Most current economic models are based on a prior goal of 2% annual growt

WFB shares their concern that at this stage of the business cycle, stimulus on the demand side will lead to higher inflation.

They project inflation to rise to 2.0% in 2017 vs. 1.1% in 2016.

Per WFB, the rising inflation expectation will likely result in the Fed rethinking it's strategy regarding interest rates.
They project that the Fed will be more aggressive in raising interest rates going forward.

WFB anticipates two increases in the Fed funds rate in 2017, with the possibility of a third increase depending on the inflation pattern cited above. 

As a result, they project a rise in the two-year Treasury rate, but a flatter yield curve out to 10 years, as global capital continues to flow to the U.S.

The times, they are a- changing.
As always, the best way to keep in front of the curve is to stay informed.
So please stay tuned....




The news is filled with stories of people needing to prove how right they are.
Positions are hardening and tempers are flaring.
Regardless of the damage to relationships with others, right is right.....isn't it?
Or is it?

What happened to our interest in compromise and finding a middle ground?
Where is our concern for kindness?

Many times a day, we choose whether to be right or to be kind.
Our words show whether we are more interested in talking or listening.

When we focus on being right, we may "win" but we also damage relationships in the process.

A funny thing happens when we focus on being kind....
We build bridges....which lead to understanding...which leads to compromise....which leads to solutions where both parties win.

In the days and weeks ahead, let's remember to listen and try to understand first.
Then we can share our views with compassion and kindness.

Make it a great week!

David Rosenthal, MAI, FRICS
President & CEO
Curtis-Rosenthal, Inc.




Friends and Colleagues
It looks like lackluster economic activity will keep the Fed from moving interest rates this week.
Please read on for insights about the current state of the economy thanks to the economists at Wells Fargo Securities (WFS).

Uninspiring Consumer Economic Activity

  *   Retail sales fell 0.3% in August.
  *   The prolonged period of consumer household deleveraging is largely over, as:
     *   the ratio of debt-to personal disposable income is at its lowest level in almost 14 years,
     *   the personal savings rate is below its long-run average, and
     *   household net worth is at a new all-time high.

Uninspiring Industrial Economic Activity

  *   Industrial production was disappointing in August, with weakness in manufacturing and utilities output.
  *   Consumer goods, business equipment, non-industrial supplies and materials contracted.
These anemic results suggest to WFS that the manufacturing sector is not yet out of the woods.

How Will the Fed Respond?
While the Fed seems ready to move, WFS projects that they will hold rates steady in September due to:

  *   mixed economic data
  *   low market expectations of a current rate hike
  *   lack of consensus among FOMC members
Probability of a rate hike at this week's FOMC meeting fell to 20% from 28% last Friday.
WFS projects the FOMC might send signals about a future rate hike if they characterize future risks as "balanced" within the meeting statement.

Projected Changes to the Fed's Economic Outlook

  *   WFS expects only modest revisions to the Fed's economic projections.
  *   They anticipate a slight downward revision to GDP growth for 2016 due to the weaker-than-expected Q2.
  *   Slower labor market progress in recent months may also lead to a more modest projected decline in the unemployment rate.
  *   Nevertheless, the unemployment rate currently approximates full employment and core inflation remains at 1.6%.
Based on the current trajectory of the economy, WFS projects a slower path for interest rates in 2017 and 2018.

Current changes in the economy are nuanced, and require analysis and interpretation.
As always, the best way to keep in front of the curve is to be informed.
So please stay tuned....


Thought for the Week


Do we carry unresolved anger and pain around with us?
Hurt feelings or sleights from long ago.
People  who wronged us and caused us pain.
How much of our life force is taken up by carrying these weights around with us?

What if...

What would happen if we met our tormentors face-to-face?
What if we told them about the pain they had caused us?

What if we stop seeing them as our tormentors and instead learn to see them as human beings?

Complete with all of the many human complexities of life.
What if we try to understand that like us, they have a light side and a dark side, strengths and weaknesses, pressures, joys, sorrows...and like us, they sometimes makes mistakes?
Some people carry grudges with them to their grave.
Others try to address them in their final days.
How cathartic would it be for us and for those who have wronged us, if we took the difficult step of meeting them face-to-face and addressing our issues together?

How liberating for us.
How liberating for them.
What positive role models we could be for our children if we could teach them to find the humanity in those who have wronged us, by digging deep and truly learning how to forgive.
In the days and weeks ahead may we spend some quiet time within ourselves learning who we carry around on our backs.
And may we find a way to heal ourselves by forgiving them.

Make it a great week!

David Rosenthal, MAI, FRICS
President & CEO
Curtis-Rosenthal, Inc.



Friends and Colleagues

 What will Brexit mean for the economy?

 Here are some thoughts on the impact of Brexit on the economy according to the economists at Wells Fargo Bank:

  • UK exiting the EU adds greater risk to the global economy.
  • UK will likely go into a recession.
  • The EU will likely grow at a slower rate, but it should not slip into a recession.
  • This economic shock will likely be similar to the US bond downgrade in 2011, or China's devaluation of its currency last year.  In both cases, the global economy was resilient and weathered the storm.
  • According to the terms of its membership in the EU, it will take the UK two years to fully exit. 
  • This will allow time for the UK to negotiate a new trading relationship with EU countries.
  • The UK's fallback trading position should be based on it's participation in the WTO, which already provides for limited trade tariffs.
  • Interest rates should remain low.
  • Foreign capital flows into the US should increase as foreign investors pursue a flight to safety.
Threat or opportunity?  That remains to be seen...so stay tuned.


Thought for the Week

Teaching Peace

San Bernardino...Orlando...Istanbul...

Our world has gone mad!
Hate-filled acts consume our headlines and our attention.
Our social media is inundated with hate-filled speech.
The world is being bullied.

How do we counter the hate?

We remember that teaching hate will never lead to peace.
Only teaching peace, speaking out about peace and practicing peace will lead to peace.
It worked for Ghandi...it can work for us.

Make it a great week!

David Rosenthal, MAI, FRICS
President & CEO
Curtis-Rosenthal, Inc.



Friends and Colleagues

The labor market is tight, productivity is down, and the Fed remains cautious on interest rates.  
We are a few weeks away from the historic UK Brexit vote, and domestic loan demand is strong.  
Here are some further insights about the current state of the economy thanks to our friends at Wells Fargo Securities (WFS).

Job Openings Match All-Time High

  • Job openings rose to match an all-time high in April at 5.79 million.
  • This is likely due to a tighter labor market as firms find it more difficult to fill open vacancies.
  • Job turnover eased slightly during April, suggesting employees may have decreased confidence of securing a new job after leaving their current position.
  • Unemployment claims are near a historically low level.
  • WFS says this data suggests that layoffs remain relatively low and there is no impending sign of deterioration in the labor market.

Productivity Continues to Under Perform

  • Productivity rates were down in the first quarter; however, this may be a seasonal slump.
  • WFS encourages us to look for a likely productivity rebound in Q2.

Fed Remains Cautious

  • Long-term interest rates fell in the wake of recent weak employment reports and rising uncertainty ahead of the upcoming Fed meeting and Brexit vote.
  • WFS tells us that “a June hike is clearly off the table”; however, Chair Janet Yellen laid out the case for raising rates later this year.
  • While financial markets are only pricing in a 53.4% likelihood of a 25 bps rate rise by the end of 2016, WFS projects two 25 bps rate hikes in 2016 but fewer increases in 2017 and 2018.
  •  Bond yields have fallen based on polls predicting a close Brexit vote, together with discouraging reviews on the European and global economies from the World Bank.

Fed’s Beige Book Points to Increased Loan Demand
  • The Federal Reserve Board’s most recent Beige Book reported an overall strengthening of loan demand and a modest improvement of credit conditions in the United States.
  • The Fed noted, “overall loan demand was up moderately in all Districts that reported, with the exception of Dallas.” 
  • The Federal Reserve Bank of Dallas has seen mixed growth in lending, reflecting continued energy-sector weakness in Houston and service-sector growth in Austin and Dallas. 
  • In other Districts, the rise in loan demand was widespread across asset types, including increased demand for residential mortgage lending.
  • The pickup in mortgage lending coincides with the strong home sales data and reinforces the solid momentum that continues to build in the housing market.
  • Several Federal Reserve Districts also noted improved credit quality and lower delinquency rates on consumer loans during the period.

In the midst of the madness out there, our world continues to churn and move forward.
As always, the best way to keep ahead of the curve is to be well informed.

So please stay tuned….   


Thought for the Week

Celebrating Our Differences

The tragedy in Orlando this weekend added yet another horrific chapter to the all-too-human tale of intolerance for differences.

We are all citizens of the same planet.
We all live, and we will all die.

Yes, we have differences…of age, gender, height, eye color, skin color, ethnicity, culture, religious belief, political point of view, taste in music, favorite color, etc., etc.

We are all different.
And what a great blessing that we are.
How bland would our world be if we were all the same.
What would we talk about?

Rather than seeing those who appear different as “The Other”, what would happen if we made time to get to know them.
What are their thoughts, and hopes and dreams?
What keeps them awake at night?
What do we have in common?

Each of us can help heal the world if we make the time to reach out to even one person we see as different.
Let’s ask them their point of view.
Get to know them.
We may find that we have more in common than we thought.

Make it a great week!      

David Rosenthal, MAI, FRICS
President & CEO
Curtis-Rosenthal, Inc.



Friends and Colleagues

Recent data shows that our economic recovery is unevenly spread.
It also shows some signs of progress in the Eurozone and a glimmer of hope on the student loan front.
This week our friends from Wells Fargo Securities (WFS) share some interesting insights on the current state of the economy.  
Please read on to see what is happening and why.

An Uneven Recovery

Economic data released during the week suggest another quarter of soft activity.
Retail sales were flat again in April.
They have been negative or flat in four of the past five months.

Transitory factors (i.e.- weather and West Coast port disruptions) are largely behind us.
Consumers remain cautious despite strengthening labor market conditions and low gasoline prices.
Are we now seeing a permanent slowdown in overall economic activity?


Why are consumers still on the sidelines?

WFB believes we have an uneven recovery where much of the spending comes from the high end, while middle and lower-income households are still lagging.

One sign of the imbalance is the rise in online sales, which largely come from higher income consumers.
Sales at non-store retailers rose for the third consecutive month in April, up more than 6% over last year.
On the other hand, overall retail sales have disappointed.
Between 2007 and 2013, the upper 40% of incomes accounted for all of the gain in average before-tax income growth.

Retail sales suggest slower economic growth in Q2.
Nevertheless, the S&P 500 hit another record high last week.
This implies that investors are confident that the Fed will not raise interest rates in June.

Interest Rates?

Fed Chair Janet Yellen has warned that bond yields “could see a sharp jump” when the Fed raises its benchmark interest rate.
The Fed however, remains data dependent and WFS projects that market participants will likely react to every data release and comment made by the Fed until the first rate hike.
WFS projects that the second half of the year should show better fundamentals; however, they caution that we should expect a choppy road ahead, .

Better Eurozone Will Help Global Growth

Things are happening in the Eurozone that hint to better performance by the battered region.
Q1 GDP growth came in line with expectations, increasing 0.4% vs. Q4 2014 and 1.0% vs. Q1 2014.
France and Italy grew more than expected, 0.6% and 0.3% respectively.
Germany, however, disappointed with a growth rate of 0.3%.

Eurozone consumers have been helped by the drop in the price of energy.
The large depreciation of the euro, down 10% since last summer, is also helping the region’s export performance.
Imports are growing strongly, largely from China.
Growth in Eurozone imports is probably helping China’s economy, which showed growth in industrial production of 6.2% YTD.

Banking Reserve Surplus

In the post-Great Recession era, banks are holding greater reserves than in years past.
While this provides stability to the banking system, it may lessen the impact of Fed moves to alter interest rates through changes to the fed funds rate, since banks are less dependent on Fed Funds due to their larger reserve holdings.

New Perspective on Student Loans

A recent study by TransUnion suggests that the debilitating effects of student loan debt may be overstated.
The study finds that, while young graduates may initially struggle to gain access to and utilize credit, they tend to surpass similarly aged consumers in loan participation rates after two to six years.
This supports research by WFB which demonstrates that student debt and other factors are merely delaying recent graduates’ ability to become homeowners.
The study also showed that consumers with student loans tended to have lower delinquency rates on credit card and auto loans than consumers without student debt.

Clearly student loan debt remains a large and pressing issue.
This study however, seems to offer hope that student loan debt may not be as crippling as some might suggest

An uneven recovery…a surviving Eurozone…a fresh take on the mountain of student loans…
Our story continues to evolve, and as always, the best way to manage the evolution is to keep informed.

So stay tuned…


Thought for the Week 

How Are You?

How many times a day does someone ask us, “How are you?”
A simple, question to fill the empty space after “Hi”.
But does it have to be just a hollow question?

Our typical response:  “Fine. How are you?”
A non-response…a nicety…a deflection.

And some days, a lie.
Are we really fine?

What happens if we take a risk and say how we really are?
“I’m excited...”
“I’m overwhelmed…”
“I’m grateful…”
“I’m nervous…”
“I’m happy…”
“I’m sad…”

Real responses open up real conversations.
They encourage others to share.
They help us pay attention to how we really are.

Our answer can also help to change how we are.
Just by saying: “I feel great” or “I’m terrific”, we may help ourselves to feel that way.
And it may help others to feel good too.

In the days and weeks ahead, when someone asks us “How are you”, may we consider for a moment how we really are.
May we try out different responses to see how they make us feel.
May we be aware of how our responses impact others around us.
And by doing so, may we turn our non-versations into conversations.

Make it a great week!        

David Rosenthal, MAI, FRICS
President & CEO
Curtis-Rosenthal, Inc.



Friends and Colleagues

The economic forecast for 2015 and beyond is starting to take shape, and change is in the air.
This week we review some projections in the 2015 Federal Budget Outlook from the Congressional Budget Office (CBO) in comparison with projections from our friends at Wells Fargo Securities (WFS).
Read on to see where they agree, where they differ and what the future may hold.

Federal Fiscal Policy Outlook

The CBO recently published their 2015 Federal Budget Outlook which forecasts economic growth and the federal deficit through 2025.
The WFS economic forecast projects a slightly faster pace of growth than the CBO.

Both forecasts project the following over the next few years:

  • Stronger consumer spending
  • Stronger business investment
  • Continuing drag from net exports

WFS differs from the CBO forecast in the following areas:

  • WFS projects greater government purchases over the next 2 years since they expect a partial reversal of sequestration cuts.
  • WFS also anticipates a slightly flatter yield curve which would lead to lower net interest expense on government debt assuming rates rise later this year.

Government Debt, Interest Expense and the Deficit

The average maturity of government debt holdings is roughly five years.
This has been increasing in recent years.
Longer term debt leads to greater interest expense, resulting in a larger drag on the federal deficit.

The deficit as a share of GDP was 2.4% in 2014; however, it is projected to rise to almost 4% by 2025.
This leads to concerns about how to balance the budget in the years ahead.

Rate Hike?

WFS continues to project a rate hike in June, based on Fed Chairman Yellen's testimony to Congress last week that the Fed sees recent inflation weakness as transitory due to the following:  

  • Consumer prices fell again in January, based largely on lower oil prices and a stronger dollar.
  • Consumers remain confident despite the fall in the headline index.
  • Weaker home sales numbers point to consumers' hesitation to make major purchases.
  • Durable goods orders rebounded, though not enough to make up for recent weaknes

Global Review - Modest Growth

WFS observes that a modest cyclical upswing appears to be taking hold in the Eurozone:

  • Sentiment indicators continue to improve
  • Consumer spending in France was stronger than expected
  • Growth in bank lending turned positive for the first time in nearly three years
  • Revised real GDP data in the UK showed growth in consumer spending

It looks and feels like change is in the air.
The timing and form of change remains to be seen.

The best way to manage change is to keep informed, so as always stay tuned...


Thought for the Week 


"I trust you will do a good job."
"Trust me, I meant what I said."
"Of course you can trust me...."

Every day we make decisions about trust.
Trust is defined as: confidence in and reliance on good qualities, especially fairness, truth and honor.

Who do we trust?
Our spouse? Our family? Our friends?

Who can we trust?
Our co-workers? Our boss? Our acquaintances?

Who should we trust?
Ourselves. Our loved ones.  

Trust is hard to earn, yet so easy to breach. 
What takes years to build up can be torn down in a moment. 

Open, honest communication can help to build trust.
Lack of communication can lead to trust breaking down. 
Trust is a bridge between people that must be strengthened and reaffirmed regularly.

In the days and weeks ahead, may we be worthy of the trust of others.  
May we treasure those in whom we place our trust.  
And may we learn to communicate well in order to build better bonds of trust.  

Make it a great week!   

David Rosenthal, MAI, FRICS
President & CEO
Curtis-Rosenthal, Inc.