GDP Comment

Ten-year interest rates have declined 15 basis points, from 4.82% to 4.67%, on indications of weaker economic growth. This was capped off by the third quarter GDP report of 1.6% annualized growth. UBS comments that, "if anything, the details of Real GDP looked even weaker than 1.6%. The 1.6% figure was despite a reported 27.5% rate of increase in motor vehicles production . . . Excluding motor vehicles production, real GDP was up at just a 0.9% annual rate in Q3 after 3.0% in Q2."

The 4.67% ten-year rate is near recent lows of 4.55% in late-September. We think interest rates, stocks and the economy transition to a condition of "noise" versus trends for the balance of the year. Expect reports to continue to present a mixed picture.

Strategy Update: Below are charts of two strategies that have done well recently, Dynamic Beta and Focused Analyst Growth. In each case lately, our managers have elected to take partial profits on positions and attempt to moderate the bets. Analyst Growth powered through this recent period with high earnings growth companies. In contrast, Dynamic Beta suffered in late August and early September initially through holding too much cash, then later through too early of a bet on resource and materials stocks. The latter bet has paid off in recent weeks.