Spring Flowers or Fall Showers?

March 22nd, 2019


Mother Nature has finally sprung spring! The green shoots sprouting in the flowerbed and the robins joyfully chirping in the trees tell us spring is, finally, here and summer is just around the corner.


Global economic seasons are changing, too. Whereas weather seasons are characterized by fluctuations in temperature and precipitation level, economic environments are identified by changes in growth and inflation.

Economies may be compared to the four weather seasons: Welcome spring warmth occurs when growth accelerates and inflation decelerates. Economies create the hot summer climate when both accelerate. In the fall, leaves change color when inflation remains hot while growth stalls. Dreaded winter arrives when both growth and inflation go cold.

Unlike the natural progression of weather from spring to summer then fall and winter, the change from one economic season to the next is not necessarily sequential. For instance, an economy may skip fall entirely and jump from summer to winter. The length of an economic season may also persist longer or shorter than a three-month period.

Fortunately, by plotting changes in economic seasons over time, to some degree, upcoming seasons may be anticipated. In what season is the current US economy and how might it be changing? Should we next expect spring flowers or fall showers?

One of our research partners, Hedgeye Risk Management, forecasts these seasonal economic changes. The graph on the following page depicts the four economic seasons with spring on the top left, summer the top right, fall at bottom right, and winter bottom left.

Over the last two years, the US economy has bounced back and forth between spring and summer – skipping fall and winter entirely. In fact, we experienced the longest string of acceleration in economic growth ever. These conditions have paved the way for strong equity market returns.

Successful navigation through each season requires different gear. Do you rush out to buy a shovel in the middle of a snowstorm or do you prepare for the blizzard by purchasing that shovel from the bargain bin during summer? Markets are the ultimate discount shoppers; they prepare for seasonal shifts ahead of time. They started buying snow shovels in early Q4 2018 to prepare for slowing growth.

Much of 2019 will likely involve strenuous work with the unpopular snow shovels and rakes rather than lounging by the pool. Buying fall and winter gear is equivalent to making thoughtful tactical asset allocation decisions – tilting portfolios in ways that makes sense for the anticipated environment ahead.

Economic fall and winter call for defensively positioned portfolios, with higher than usual levels of cash, bonds, or alternative investments and lower amounts of stock exposure. We have positioned your portfolio appropriately to successfully navigate the upcoming economic season.

Seasonal Economic Trends - 2019


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Patrick V. Masso, CFA
Vice President, Investments Team Leader
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