Macro Commentary

The strength in the US dollar has started taking its toll.  On Friday afternoon, the Bureau of Economic Analysis (BEA) announced the preliminary Q4 GDP in the US to be 2.6% annualized (quarter-over-quarter).  Consensus was looking for 3%, so the announcement took the US equity market lower marking another weak start to a calendar year after the growth scare that started 2014.  While consumer spending was up (+2.9%), the primary detractor was trade (subtracted 1.0%).  With about a third of the companies in the S&P500 having reported earnings, we are also hearing the effects of the strong USD on multi-national corporate profits.  Forward guidance from companies deriving over 50% of their sales outside the US (specifically Johnson & Johnson and Kimberly Clark) set expectations for 6% earnings DECLINE despite 4-5% organic growth in sales.  Both equities dropped on the news showing that investors may need to ratchet down earnings growth expectations for these global companies as the USD stays strong.

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