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QUARTERLY UPDATE
Second Quarter, 2015 July 1, 2015
Performance for the June quarter exceeded benchmark indices. Our working
hypothesis embraces reacceleration in the economic setting. Recovery in
housing, capital spending and consumer end product demand should gather
momentum this year and during 2016.
Although inflation is quiescent with commodities like oil, copper, coal and
steel depressed, wages are beginning to increase with unemployment rates
confirming a tightening environment. Even capital spending is beginning to
stir from years’ long depressed levels.
There are plenty of challenges to our reflation point of view. The strength of
the dollar is a problem for our multinationals and for the country’s balance
of trade which could turn even more negative and impact GDP momentum.
Additionally, personal consumption expenditures need to carry the country’s
GDP momentum. However, the debt capacity for consumers gets challenged
if interest rates escalate. The prime mortgage rate is back to 4.25%.
Historically, this is an attractive borrowing level, but months ago we were at
3.6%.
There are other serious macro challenges to our forecast of 2½% to 3% GDP
momentum for ensuing quarters. Federal expenditures show no new
initiatives. The budget remains flattish, and this is unlike previous cycles.
Congressional stalemate seems an ongoing condition, unlikely to change,
barring one party’s hegemony in the Congress.
The fragility of our trading partners and any future strength of the dollar
could impact our GDP by as much as one percentage point. Our call is the
dollar will attain parity with the euro in the next 6 to 12 months. We
discount the IMF’s projection of European recovery by 1% as well. More
and more our domestic growth rate is dependent on private debt capacity
expanding from present levels which are certainly well below the 2007 peak.
We are at a ratio of 1.65 times as to private gross debt to disposable income.
At peak the ratio reached over 1.9 times.
Our deep basic is the economy has a fair chance of reaching a 3% growth
rate near term, but in the outlying years, 2017-‘19 something has to give.
The rest of the world has to grow faster, our federal spending must rise and
the dollar’s strength needs to end sooner rather than later. Housing and
capital spending needs to recover further while our trade balance remains in
negative ground.
Continued on next page
Although the statements of fact and data in this report have been obtained from, and are based upon,
sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such
information may be incomplete or condensed. All opinions included in this report constitute the Firm’s
judgment as of the date of this report and are subject to change without notice. This report is not intended
as an offer or solicitation with respect to the purchase or sale of any security. This information is intended
for financial advisor and/or Atalanta Sosnoff client use only and is for informational purposes only.
Actual portfolios may vary. Past performance is no guarantee of future results.
Atalanta Sosnoff
Investment Policy Committee
Robert Ruland (far left)
Senior Vice President, Portfolio Manager
Mr. Ruland joined Atalanta Sosnoff as
a Research Analyst in April, 2002 and was
promoted to the Investment Policy Committee
in January of 2006.
He was formerly
a Research Analyst at Eagle Growth Investors,
LLC. Previously, he was a Research Analyst
at Lehman Brothers and Banc of America
Securities. Mr. Ruland earned a B.S. degree
in Finance from the State University of New
York at Albany in 1990 and an M.B.A. from
New York University in 1995. Mr. Ruland is a
Chartered Financial Analyst. Mr. Ruland is an
equity participant of the firm.
Martin T. Sosnoff (left)
CEO, Chief Investment Officer
Founder of Atalanta Sosnoff Capital
Corporation, Mr. Sosnoff was formerly
chairman of Atalanta Capital Corporation. He
also was director of research at Starwood
Corporation, a private investment firm, and
a research analyst at E.F. Hutton. Mr. Sosnoff
has authored two books on the money
management business, Humble on Wall Street
(1975) and Silent Investor, Silent Loser (1986).
He was a columnist for Forbes Magazine and
the New York Post. He is a trustee of Bard
College and formerly an overseer at the Stern
School of Business at New York University.
Mr. Sosnoff earned a B.A. from City College
of New York and an M.B.A. from New York
University and is a Chartered Financial
Analyst. Mr. Sosnoff is an equity participant
of the firm.
Craig B. Steinberg (right)
President, Director of Research
Mr. Steinberg became President in August,
1997. He served as Executive Vice President
and Director of Research for Atalanta Sosnoff
since 1994. Mr. Steinberg has been a Portfolio
Manager since 1988. Prior to joining Atalanta
Sosnoff in 1985 as an Analyst, Mr. Steinberg
was a securities analyst at Prudential Equity
Management. Mr. Steinberg earned a B.S.E.
degree from the Wharton School of the
University of Pennsylvania in 1983. Mr.
Steinberg is an equity participant of the firm.
Jack McMullan (far right)
Senior Vice President, Portfolio Manager
Mr. McMullan joined Atalanta Sosnoff as
a Research Analyst in January, 2001 and was
promoted to the Investment Policy Committee
in January of 2006. Prior to joining the firm,
he was employed as a Consulting Manager for
FactSet Research Systems. Mr. McMullan
earned a B.S. degree in economics from the
Wharton School of the University of
Pennsylvania in 1996 and a M.B.A. in finance
at New York University in 2003. Mr.
McMullan is an equity participant of the firm.
Atalanta Sosnoff
For more information, see your financial advisor
101 Park Avenue,
fax: (212) 922-1820
Building on Long-Term Success
New York, NY 10178-0008
phone: (212) 867-5000
web: www.atalantasosnoff.com
Quarterly Update
Atalanta Sosnoff
Our view on the valuation level of the S&P 500 Index is that at 17 times
earnings we’re at fair value. After some adjustment for the oil sector’s earnings
hit and from the dollar’s strength, probably both 1-time events likely to end
within 12 months, S&P 500 Index earnings could come in this year around
$115 to $120 a share, lower than previous forecasts by 5%. Our relatively
cautious stance on interest rates conforms with portfolio constructs. There’s
more opportunity in low rated debentures than Treasuries.
• Large-cap equity manager
firm with over 20 years
experience.
Equity portfolios reflect our call for moderately rising interest rates arising from
gathering GDP momentum. We are overweight banks, financial houses
benefitting from a spike in money market rates and continued deal activity.
Healthcare is an overweight with the accent on biotech houses. Underweights
embrace the consumer staples sector, utilities and energy where we see oil
oversupply lasting well into 2016. Technology is equal weighted with the
emphasis on major internet properties.
• $5.7 billion in firm assets
as of May 31, 2015
Facts at a Glance
• Investment philosophy
focused on earnings
acceleration.
If we are even a little right on our moderate reflation call, portfolio performance
should continue to show relative strength.
Although the statements of fact and data in this report have been obtained from, and are based upon, sources that the Firm believes to be reliable, we do not guarantee their
accuracy, and any such information may be incomplete or condensed. All opinions included in this report constitute the Firm’s judgment as of the date of this report and are
subject to change without notice. This report is not intended as an offer or solicitation with respect to the purchase or sale of any security. This information is intended for
financial advisor and/or Atalanta Sosnoff client use only and is for informational purposes only. Actual portfolios may vary. Past performance is no guarantee of future results.
Atalanta Sosnoff
For more information, see your financial advisor
101 Park Avenue,
fax: (212) 922-1820
Building on Long-Term Success
New York, NY 10178-0008
phone: (212) 867-5000
web: www.atalantasosnoff.com