The Economy has slowed markedly in the first quarter. We had a meeting with the Chief of Research of the Atlanta Federal Reserve, Dave Altig, and got the latest information. As of now the tracking numbers show a GDP for the first quarter of just 0.3%. That estimate was later revised down to 0.2% after our meeting. If we do eventually report a GDP for the first quarter of  2015 below 1%, it will be hard to achieve the hoped for 3% yearly growth without massive growth in last three quarters. More likely the best scenario would be a  2-2.5% GDP for 2015.

UNEMPLOYMENT

The Unemployment number that we hear stated widely, that is now in the mid 5% range, is called the U-3 Employment number. The U-6 unemployment number includes the U-3 numbers and additionally the number of people who are underemployed, including part timers wishing they could be full time, and folks employed in a job but well below their skill level. The gap between U-3 and U-6 is usually about 4%. Today that gap sits stubbornly at 5 1/2%. This additional 1.5% in the gap represents  about 2.7MM people. By most analysis the most likely part time effect that is attributed to Obama care incentives to employees under 30 hours is only about 800,000 people. So there are some structural  issues that account for the remainder of the 2.8MM gap.

April is an important month. We get the first look at GDP for the first quarter. This first look number will give the FED reason to decide if they go ahead and raise rates in the second quarter or if they will retreat for later in the year.

Gold has faded in March after a strong rally in February. This is not the first time in recent years that Gold has attempted a move only to fade, since the gold prices came down from $1900 per ounce a number of years back.

PORTFOLIO CHANGES THIS MONTH

To recap our moves this past month,

–  the Capital  Appreciation portfolio of individual stocks moved out of the  Precious Metals sector and back into the  Restaurant Sector

– US Sector ETF model also as a result of a different signal than above, rotated out of Precious Metals and into Consumer Discretionary ETF, which similar to the above.

ALSO THIS PAST MONTH

International Stocks are showing some strength and have now earned a position in a number of our dynamic rotation models. Recall US stocks have been the best performing asset class, measured in US dollars, for the past 5 years 2009 -2014. Since International Stocks had been lagging for a while the gap in relative valuations was widening everyday. So now as International stocks work higher perhaps that gap between US and International  will narrow. We suspect that gap will follow history and narrow either way, it’s just a matter of time. This could present an opportunity for investors in International stocks.

HOUSEKEEPING

We are now sending emails whenever we have any portfolio  changes and our clients will see those e-mails explaining the portfolio by way of recap and then detail on the specific trade and why. This should keep everyone better informed.

That’s all for now, back in May with more comments.