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PFM Asset Management LLC <br />REDWOOD CITY <br />For the Quarter Ended March 31, 2018 <br />Portfolio Review <br />A long list of positive economic data remains a key driver of economic growth, consumer confidence, and business optimism . <br />•GDP posted an upward revision of fourth-quarter GDP to 2.9%. <br />•Estimates for 2018 GDP call for growth in the range of 2.7% to 2.8%. <br />•Jobs growth continued to strengthen, averaging over 200,000 per month in the first quarter. <br />•The unemployment rate remained at 4.1%—a 17-year low. <br />•Productivity hit a 2-year high. <br />•Manufacturing reached a 3-year high. <br />•Consumer confidence rebounded after a dampened fourth quarter and now sits at a 14-year high. <br />•Inflation, while below the Fed’s target of 2%, inched higher by most measures. <br />New Fed Chair Jay Powell made his first public address at February’s semi-annual monetary policy report to Congress. His <br />maiden testimony hinted at a continuance of gradual rate hikes while acknowledging that “the economic outlook remains strong” <br />and the expectation for inflation to increase and closely approach the FOMC’s 2% objective remains intact . <br />The Fed remained true to its stated course, raising short-term rates by ¼ percent in March, and interest rates continued their <br />ascent over the quarter. As a result, we strategically positioned the portfolio with a defensive duration bias relative to the <br />benchmark to help insulate market values in the well-choreographed interest rate environment. However, with rates at or near <br />multi-year highs, there were also opportunities to capture higher yields selectively in some parts of the yield curve when <br />rebalancing the portfolio. <br />Portfolio Recap <br />2 6.1.B. - Page 8