You may have read just a few of American Values Investments' newsletters, or you may be a regular reader, perusing each one as it is published. Either way, you may well recognize my by-line as it appears above this article. There is, however, one distinction between this one and most others that have preceded it: Beginning just last month, I was able to add the initials PhD after my name. You see, I recently completed the course work and dissertation that together granted me the moniker Doctor of Philosophy.

None of this is meant to be braggadocios. In fact, the only reason I mention it relates to the field - Church History - in which I was awarded the degree by a small seminary in Indiana in June. And while it may not appear especially historic - although in many places it is - the dissertation was entitled The Rapid Growth of Faith-Based and Related Investing. While it does include several elements of history, perhaps more importantly, it's unquestionably germane for our readership, both from the ranks of financial advisors and their clients as well. But rather than simply describing the dissertation's title, and with the limited space available for this article, let's look at a synopsis of the structure and approaches upon which the work is based.

From the beginning...
The dissertation contains three chapters - fewer than many, but with generally more pages than is frequently the case with other similar efforts. Chapter I lays the foundation for the two primary types of investment analyses. First comes traditional (old) research, which is highly quantitative and pays scant attention to quality and values. It's the kind that has long been associated with what has come to be called the "sell side" of the investment world. Conversely, the subject then moves - essentially for the remainder of the dissertation - to the newer form of investing, wherein values sit at the top of the list of "must haves."

Next comes an examination of the history of the newer forms of investing. In this case newer can be tied back to a 1758 meeting of the Quakers, during which the group officially forbade its members from participating in the slave trade. Then, moving right along, it's worth noting that since about 1990 many of the impetus for improvements in socially-responsible investing have emanated from an annual "SRI in the Rockies Conference," where attendees spend their time discussing and describing new initiatives.   

Topics that follow along in the initial chapter include another pass at delineating the expanding differences between old and new in the investment world, an examination of impact investing (a form of investing that has existed since 2007) and is still confusing to many. As I note on the subject, "While it may be something of an exaggeration, it seems that, were one to query a dozen investors, including professionals, in a quest for a precise definition of Impact investing, the questioner might well emerge with a plethora of separate, and sometimes radically varying, responses."

The Millennials are coming fast.
Moving along, the expanding role of what has become known as Millennials as investors also receives meaningful attention.  Indeed, it's an appropriate observation that that group now constitutes the largest demographic in the U.S. However, from a purely pecuniary perspective, the more conservative baby boomers group still collectively packs the hardest investment wallop. As such, faith-based investing remains among the most significant forms of SRI. And every bit as importantly, it's likely to remain so for years to come.   

There are other significant topics covered in the chapter. Indeed, borrowing from writer Lisa Smith in an Investopedia piece, one finds coverage of the faith-based approaches of many - but certainly not all - of the world's major religions, including Catholicism, Judaism, Islam, and the numerous protestant denominations (including the Church of England).

The final topic in the kick-off chapter involves the relative success of socially-responsible investing. We'll keep that assessment brief by noting that, a contributor to Forbes, who writes under the pseudonym MoneyShow, said in an article in the magazine just a few months ago, "Is there any evidence that SRI filters will improve your investing performance? The research is limited, but so far, it leans in favor of SRI investing. In other words, more responsible companies do tend to be better investments."

Making the companies more desirable...
As noted, the first chapter is infinitely more complex than either of the two that follow. As such, the attention to the second and third chapters will be marked by considerable brevity, vis-à-vis their predecessor. Chapter II is based primarily on an approach quite different for the first chapter: It switches to the corporate side, primarily discussing methods that can improve corporate cultures, such companies are increasingly able to attract the interest from SRI- and faith-based investors. The methodology employed is the provision of synopses of several books, each of which deals with the combination of faith and work, corporate culture, corporate ethics, or improving the attitudes and functionality of a workforce.

The book that garners the most attention is entitled God at Work: The History and Promise of the Faith at Work Movement, by Princeton professor David W. Miller. In it, Miller looks at how the Faith at Work movement developed and considers its potential value for business and society.

More on the stellar chaplaincy movement...
Finally, Chapter III is largely devoted to a subject about which only a sliver of the U.S. - and the world's - citizenry knows much about: the burgeoning corporate chaplaincy movement. It's a topic about which I've written previously. And it's a movement with at least a couple of key objectives. First, it stands to strengthen the cultures of those companies involved in it, and second, it has the potential to perform the estimable function of closing what has come to be called the Sunday-Monday gap - the schism between weekend worship and weekday work.

The Tariff Effect
As my American Values Investments compatriot George Parks sagaciously noted last week, "Recently, the media have been concentrating on the effects of tariffs and rising interest rates and to a lesser degree on tight labor markets." But for the sake of perspective, he also pointed out that tariffs cause the economy to react in a similar way as do price increases. And, as clearly would be anticipated, they have a larger effect on some businesses and consumers than on others.

He went on to point out that, at the macroeconomic level, tariffs have a far lesser effect than as generally assumed. For instance, the most recent $150 billion hike would boil down to less than 1% of a $19 trillion economy. Indeed, the primary effect lies in the alteration of sentiments. And so the key question becomes one of whether sentimental questions brought on by tariffs - or price increases, should they materialize meaningfully - involves whether consumers will temper their spending. Keep in mind that they represent more than two-thirds of the total economy. So the query turns out to be of considerable import.

 

Gross Domestic Product
But at the risk of playing typical economist by glomming onto a single issue and extrapolating its effects across the economic board, it's clearly time for me to mention the robust 4.1% GDP growth rate for the second quarter that The Bureau of Economic Analysis reported as last week came to a close. And given my contention mentioned above that consumers represent the figurative engine for the economy, it's noteworthy that its GDP growth power was demonstrated in spades by consumers during the quarter.

But let's take that observation one step deeper. There are numerous "experts" (economists and faux economists) who would ascribe the GDP growth hike to a plethora of factors, including the reductions in the government regulations that have hindered small business job creation for many years. And then there were the Tax Cuts and Jobs Act, both of which have benefited most Americans. That being the case, imagine the additional boost that would emanate from the Congress displaying the determination to push through yet another round of cuts. (Before departing from this general round of thinking, it's worth observing that, according to the Tax Foundation, the already enacted Tax Cuts and Jobs Act are predicted to account for an additional 215,000 full-time jobs in 2018 that wouldn't have existed otherwise.)  

 

Additional Factors
And there are other elements of economics at work that also deserve mention. For instance, June's pending home sales moved up by a scant 0.9%, but that represented a 2.5% dip from June 2017. Has anyone considered the possible impact of an expanding inventory shortage? At the same time, orders for U.S.-manufactured capital goods increased nicely in June. Nicely in this case equaled 1.0%.  

 

Conclusion
But where is all this likely to lead the markets? For that particular response, it seems appropriate to return to the wisdom of George Parks. His response: "Entering the new quarter fundamentals indicate that stocks are overvalued, but their condition can't be termed a bubble yet. Relative to fixed-income securities, equities are a much better value. As always, a major geopolitical event could result in a short-term price correction. A major shift in sentiment can also have (an) impact on equity prices.".