TCW Relative Value Mid Cap Strategy

Quarterly Commentary

September 30, 2017

Key Issues

  • The major indices reached record highs on the heels of solid 2Q earnings, global growth, and rising oil prices. After a 15% year-over-year increase in the first quarter, earnings estimates for Russell Mid Cap companies in the second quarter are for 14%. Second quarter U.S. GDP, with the third release showing 3.1% growth, assuaged concerns stirred by the tepid 1Q figure. Highlights of the report show consumer spending grew 3.3%, the biggest gain since 2Q:16, and nonresidential fixed investment rising 6.9%. The Organization for Economic Co-operation and Development (OECD) revised upward its 2018 global growth projection to 3.7% with the U.S. estimated to grow by 2.4%. As a sign of U.S. economic strength, at its September meeting the Fed announced it would begin to reduce its balance sheet reinvestment of principal payments in October; $10 billion per month, to start, and gradually raising that amount in the months to come. As expected, the Committee did not raise rates but remarked it believes growth will be strong enough to warrant one incremental increase by the end of the year. The robust labor market has helped keep Americans upbeat about the U.S. economy. U.S. consumers’ assessment of the labor market has become more positive with the index of those stating jobs are more plentiful near its highest level since before the financial crisis. With steady monthly job gains year-to-date, the unemployment rate now stands at 4.2%, the U-6 underemployment rate is 8.3%, and initial jobless (four-week moving average) claims are at lows not seen since the 1970s...

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Legal Disclosures

For Information Only

This publication is for general information purposes only and is not intended  to offer investment advice or be the basis for an investment decision.

Not An Offer

Nothing in this document constitutes an offer to sell or the solicitation of an offer to buy securities. Investing in any strategy has risks.

Price Volatility

Investing in any strategy has risks. An account is subject to price volatility. The value of an account’s portfolio will change as the price of its investments go up or down. Because an account invests in medium-sized companies it may be subject to greater price volatility than an account that invests in larger companies. Equity investments entail equity risk and price volatility risk. The value of stocks and other equity securities will change based on changes in a company’s financial condition and in overall market and economic conditions. Before embarking on the described investment program, an investor should carefully consider the risks and suitability of the described strategy based on their own investment objectives and financial position. The strategy will not invest in initial public offerings.

Forward Looking Statement

The information contained herein may include estimates, projections and other “forward-looking statements.” Actual events may differ substantially from those presented herein. TCW assumes no duty to update any such forward-looking statements or any other information or opinions in this document. TCW makes no representation that future investment performance will conform to past performance and it should never be assumed that past performance foretells future performance. TCW's portfolio managers make investment decisions based on various sources of information and analysis and are not necessarily based on the economic information set forth herein.

Past Performance

TCW makes no representation that future investment performance will conform to past performance and it should never be assumed that past performance foretells future performance. TCW's portfolio managers make investment decisions based on various sources of information and analysis and are not necessarily based on the economic information set forth herein.

A Word About Risk

Equity investments entail equity risk and price volatility risk. The value of stocks and other equity securities will change based on changes in a company's financial condition and in overall market and economic conditions.

Subject to Change

Any opinions expressed are current only as of the time made and are subject to change without notice. TCW assumes no duty to update any such statements. The views expressed herein are solely those of the author and do not represent the views of TCW as a firm or of any other portfolio manager or employee of TCW. Any holdings of a particular company or security discussed herein are under periodic review by the author and are subject to change at any time, without notice. In addition, TCW manages a number of separate strategies and portfolio managers in those strategies may have differing views or analysis with respect to a particular company, security or the economy than the views expressed herein.


There is no assurance that any securities discussed herein will remain in an account; be purchased in the portfolio at the time this report is received or that securities sold have not been repurchased. It should not be assumed that any of the securities transactions or holdings discussed were, or will prove to be, profitable or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein.

 


The index is not available for direct investment; therefore its performance does not reflect a reduction for fees or expenses incurred in managing a portfolio. The securities in the index may be substantially different from those in the strategy.