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We anticipate a slowdown will ripple through the economy as the year continues to unfold.  The current level of Treasury yield curve inversions, falling Leading Economic Indicators, and tightening bank standards have historically been associated with the economy being in, or very near, a recession.  The key to the “recession question” will likely hinge on the health of the labor market.  A half century low unemployment rate and strong wage growth continue to present a challenge to the Federal Reserve’s 2.0% inflation target.  If the central bank believes it must continue to tighten monetary policy to quell wage pressure, it will leave the economy increasingly vulnerable to a recession.

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Executive Summary:

International markets continued to recover during the first quarter.  The MSCI EAFE Index returned 8.6% during the quarter.  Value lagged growth as bank woes weighed heavily on cyclical industries during the final month of the quarter.  Currency contributed to some of the positive return, but momentum faded from the strength in the fourth quarter.  While the Euro and Pound were up slightly, the Yen was actually down modestly.  Many foreign currencies still trade at a discount to estimates of purchase price parity.

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