(continued)

The news for manufacturing was not as promising as the ISM Manufacturing PMI Index fell more than expected indicating possible contraction ahead.  Manufacturing was not the only negative surprise as consumer confidence fell well below expectation to 74.5.  The enthusiasm from the elections looks to be wearing off as the fiscal cliff and tax increases start to weigh on the minds of consumers.

As the job market and manufacturing look for ways to recovery, some industries seem to be doing rather well.  The housing industry, for instance, notes advances in both prospective buyers as well as home prices.  Even the auto industry has gained strength as sales are up 14.5% over the past year and are now above 15 million annually for the first time in almost 5 years.

Our indicators have shifted, now slightly less bullish, and we have begun to trim durations where needed.  However, we have not abandoned high quality bonds as some factors still favor quality and because of their defensive characteristics.  The U.S. unemployment rate is still high, Europe is still contracting and the tensions in the Middle East are rising.  Should these factors worsen the flight to safety will make U.S. Treasury bonds even more attractive.

Trent Dysert