The current bull market appears to be the most hated in history despite high levels of business and consumer confidence. This confidence is buttressed by strong momentum in the manufacturing sector and an unemployment rate at a level rarely seen in the last 50 years. Surveys of both large and small company executives are also optimistic, which has helped lead to consistently rising estimates for both earnings and sales, particularly within the US. With an estimated $700 billion of liquidity parked overseas, tax reform has made it more tax-efficient for US companies to bring cash home when it makes business sense to do so. So, what’s not to like? At present, a trade war or two are the most obvious concerns, but as mentioned last quarter, it is hard to handicap any outcome given the posturing and excessive rhetoric coming from all sides. We still think Fed tightening will be a headwind for stock prices and the economy as inflation and full employment likely prompt policy makers to move up interest rates. As earnings-driven investors, however, we are not intimidated by the prospect of higher interest rates as this should finally dampen the market reward to financially engineered earnings. At this stage of the earnings and economic cycle, we strongly suspect investors will be more inclined to reward solid top line growth, strong business models and ultimately, high quality unexpected earnings.
During the third quarter of 2018, the Saratoga Large Cap Growth Portfolio posted strong performance, helped by holdings in the Information Technology and Healthcare sectors. Performance was weakest in the Consumer Discretionary sector.
Information contained herein was obtained from recognized statistical services and other sources believed to be reliable and we therefore cannot make any representation as to its completeness or accuracy. Any statements not of a factual nature constitute opinions which are subject to change without notice.
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