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DISCLOSURES: The information provided herein is furnished by Miles Capital, Inc. solely for informational purposes and is confidential. It may not be reproduced or distributed to anyone else without prior consent. This document contains the current views of Miles Capital and is not intended to be, and should not be interpreted as, a recommendation of a particular security, product, or investment strategy. Such opinions and predictions are subject to change without notice. The strategies described in the presentation may not be suitable for all investors. There is no assurance that any of the objectives described will be achieved. This information contained herein does not take into account the particular investment objectives or financial circumstances of any specific person or entity who may receive it. You should consult your tax or legal advisor before making an investment, and investors are advised to thoroughly and carefully review financial, legal, and tax consequences of all investments to determine suitability. Investments in alternative assets may be illiquid and present significant risks. Past performance is not a guarantee of future results. There can be no guarantee that any investment strategy discussed in this Presentation will achieve its investment objectives. As with all strategies, there is a risk of loss of all or a portion of the amount invested. Diversification does not ensure a profit or protect against market loss.

U.S. Fundamentals Strong, but Prudent Analysis Needed

Last week, the first reading on first quarter U.S. Gross Domestic Product (GDP) came in at a 3.2 percent growth rate, well over Bloomberg consensus estimates of 2.3 percent. This increase was seen by many as a positive sign.


However, it would be premature and incomplete to assume that this pace of GDP growth actually signals increased economic strength, or that it will continue for the rest of the year. Inventories – a component of GDP – rose during the quarter as producers rushed goods into their supply chain to beat any potential trade challenges. Additionally, imports were down in the first quarter resulting in a higher “net exports” contribution to GDP, which is a temporary factor. These two factors contributed 1.7 percent to GDP in the first quarter, which is 4 times higher than their typical contribution. Excluding government and the volatile trade and inventory component, numbers were modest. Final sales to private domestic purchases – a measure of underlying demand – cooled to a 1.3 percent pace, which was the slowest since 2013.


Regardless of the composition of the GDP number, the headlines showed faster growth and very modest inflation, which helped to push Treasury yields slightly lower even on the shorter maturity of the Treasury curve, which impacts public funds investing. The Treasury yield curve remains very flat, meaning that the increase in yield – the benefit received – as one invests in longer maturity securities is very small.


We believe that the economy still remains strong, but not necessarily as strong as the first quarter GDP number suggests. Consumer spending is still contributing positively, unemployment remains low, and inflation has not increased. As a result, the Federal Reserve is still “on pause” in their plan to raise interest rates in 2019.

While we believe continued positive results are likely in 2019, it is possible we could see more volatility. Ongoing challenges to the financial markets include tariffs, worldwide growth uncertainties, inflation, and continued uncertainty around Brexit.

Disclosures
 

The views expressed herein are the current views of Miles Capital as the stated date and are provided for informational purposes only. They are believed to be correct, but accuracy and completeness cannot be guaranteed and should not be relied upon for legal or investment decision purposes. All expressions of opinion and predictions presented are subject to change without notice. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is not a guarantee of future results. Diversification does not ensure a profit or protect against market loss. As with all strategies, there is a risk of loss or all or a portion of the amount invested.