ILCB - Weekly Market Pulse: As Clear As Mud

• While the economic growth rate is slowing, that is not a contraction or a recession. If that was the case, you’d see junk bonds selling off too, and that just isn’t the case - at least not yet.
• Our investment process puts a lot of emphasis on rates of change, whether macro or micro. We classify the economy as either expanding or contracting and accelerating or decelerating. Different types of stocks and bonds benefit, depending on the environment.
• Over the last few months, the changes we’ve made to our portfolio reflect the decelerating, but still expanding, economy. The result is a higher-than-normal allocation to cash.
• A rising dollar is generally deflationary, while a falling dollar is inflationary. The state of the dollar is not always easy to determine though. The dollar index, which measures its value against a basket of currencies, has been in a trading range for six years.

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