Based on fundamentals, our tactical management models indicate that U.S. equity markets should continue to rise in the near-term. While data might change unexpectedly, the current trends look positive:

• The recovery in employment should boost consumption in the near term.
• Q2-2014 S&P 500 earnings grew 7.7%, which helps to mitigate the negative effect of above-average valuation.
• The Fed officials signaled that the abundance of liquidity is to continue for a “considerable period of time,” beyond the time when the Fed starts raising short-term policy rates (expected mid-2015). In the meantime, the ECB is moving towards its own QE program.
• WTI crude oil price eased to $93 per barrel from the peak of $106.8 it reached in June. North American supply is rising, as the U.S. became the largest oil producer in the world this year (which itself boosts jobs and the economy). Elevated oil price, taken in isolation, is still negative for economic activity and equities, but a continued price decline should reduce this negative effect over time.

About us: Model Capital Management LLC is an investment firm located in Boston, focusing exclusively on tactical investment management. Please review the following pages for more information on Model Capital’s unique approach to tactical management and tactical asset allocation models/strategies.