Our Stock/Bond Barometer asset-allocation model is indicating that the two major portfolio asset classes are near parity on valuation. The model, which goes back to 1960, takes into account real-time price levels, historical growth rates and forecasts of short- and long-term government and corporate fixed-income yields, inflation, stock prices, GDP, and corporate earnings, among other factors. The output is expressed in standard deviations to the mean, or sigma. The mean reading going back to 1960 is a 0.09 sigma premium for stocks, with a standard deviation of 1.05. In other words, stocks normally sell for a slight premium. The current valuation level now is a 0.05 sigma premium for stocks, down from 0.50 two months ago. Other valuation measures also show reasonable (if not discount) multiples for stocks. The forward P/E ratio for the S&P 500 is approximately 19, the midpoint of the normal range of 15-24. The S&P 500 dividend yield of 1.2% is below the historical average of 2.9%, but the relative reading to the 10-year Treasury bond yield is 30% compared to the long-run average of 39%. Further, the gap between the S&P 500 earnings yield and the benchmark 10-year government bond yield is 371 basis points, compared to the historical average of 400. On price/book, it is no surprise that stocks are priced at the high end of the historical range of 5.0-1.8, given that IT stocks, which have low capital bases, are the biggest component of the market. On price/sales, the current ratio of 2.7 is above the historical average of 1.9, but below the 4.0 multiple at the peak of the dot-com bubble, Lastly, the ratio of the S&P 500 price to an ounce of gold is 1.7, just below the midpoint of the historical range of 1-3. We expect results from our valuation model to continue to tilt toward stocks, as inflation calms, interest rates head lower into 2026, and corporate earnings grow at a double-digit rate. Our recommended asset allocation for growth accounts is 70% growth assets and 30% fixed income.

In this edition, performance coatings priced for bargain hunters; tariffs change playbook on technology investments; replacing artificial food dyes unlikely to stain Packaged foods' prospects; and AbbVie, Intel, and Netflix. .

Home Depot is the world's largest home improvement specialty retailer, operating more than 2,300 warehouse-format stores offering more than 30,000 products in store and 1 million products online in the US, Canada, and Mexico. Its stores offer building materials, home improvement products, lawn and garden products, and decor products and provide various services, including home improvement installation services and tool and equipment rentals. The acquisition of Interline Brands in 2015 allowed Home Depot to enter the MRO business, which has been expanded through the tie-up with HD Supply (2020). The additions of the Company Store brought textiles to the lineup, and the 2024 tie-up with SRS will help grow professional demand in roofing, pool and landscaping projects.

The job market remained healthy in February amid signs it is poised to slow. The Bureau of Labor Statistics (BLS) reported that the U.S. economy generated 151,000 nonfarm jobs in February, just above our forecast of 150,000 and below the consensus of 160,000. These numbers follow private reports from payroll processor ADP that showed slower job growth and outplacement specialist Challenger, Gray & Christmas that showed the highest monthly job-cut announcements since July 2020. January's payrolls were revised lower by 18,000 and December was revised up by 16,000. February's result and overall revisions to past results reduced the three-month average to 200,000 from 237,000. The February unemployment rate ticked up to 4.1%, which matched our estimate. Average hourly earnings increased 10 cents month to month and are 4.0% higher year over year, in line with our estimate and compared to 3.9% in January. The average workweek remained at 34.1 hours, a tick below our estimate. Employment increased in healthcare, financial activities, transportation and warehousing, and social assistance. The closely watched manufacturing sector added an encouraging 10,000 jobs. Healthcare, which may be a key to future growth, added 52,000, while federal government employment fell by 10,000. Filings for unemployment claims by federal workers thus far have been low, but are likely to rise. We are also likely to see cascading job losses at private government contractors. We believe 150,000 is a reasonable baseline at the beginning of 2025, declining to 115,000 or potentially below 100,000 later in the year. After the report, stock futures moved lower and the yield on the 10-year Treasury fell by three basis points to 4.2%. Futures contracts suggested a 97% probability that the Fed will maintain the 4.25%-4.5% funds target on March 19 compared with 91% before the report. Traders saw a 46% probability that the Fed will cut the policy target in May, unchanged from before the report.