Monthly Commentary

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July 2017

The "growth and reflation" trade continues intact due to the positive global economy and the hawkish inflection point in global central bank policy. 2017 markets have been "two steps forward and one step back," a path that rewards those fully invested or those who opportunistically "buy the dips."

April 2017
  • The start of the Trump presidency has been marked by good economic data and high confidence, while media coverage has reflected lingering uncertainty
  • Rock solid fundamentals — the strongest quarterly earnings outlook in five years — has provided a sustainable foundation
  • Despite stumbles, the administration’s pro-business posture, exemplified by a focus on deregulation and tax reform, has been reassuring to markets
  • Foreign markets have been robust, as broad global diversification hit its stride
December 2016
  • A surprise outcome in the U.S. elections ushered in a new path forward, and markets worldwide celebrated the promise of pro-growth economic policies with rising asset prices and rising bond yields
  • In effect, the markets took the reins from the central banks, clarifying the likely path toward rate normalization — reflation — and away from unconventional monetary stimulus
  • The prospect of business-friendly policies also supported a corporate earnings turnaround — potentially higher growth, increased pricing power and higher after-tax net income — a boon to global business
  • The paradigm shift will provide unexpected returns — and risks — that may create both positive and negative extremes, making a case for broad global diversification
November 2016
  • The October surprise was not in the presidential election - it was in the bond market.
  • Despite uncertainty, slowly rising yields signal economic growth and a path to normal.
  • Earnings appear on track for a positive third quarter.
  • Markets will need to transition from a yield-driven to an earnings-driven foundation.
October 2016
  • Central banks likely will continue backstopping unexpected risks and normalizing rates cautiously.
  • The U.S. and global economies are muddling along without apparent growth catalysts but few observable risks.
  • Market leadership has shifted from the U.S. toward riskier asset classes.
  • Investors should prudently stay broadly globally diversified to spread out risks and increase opportunities.
September 2016
  • Diversification works in the long run in terms of both risk and return.
  • An overconcentration in the S&P 500 is putting all your eggs in one basket.
  • It’s always a good time to own bonds.
  • In 2016 the diversification tortoise is beating the S&P 500 hare.
August 2016
  • Relative valuation techniques suggest that equities could get more expensive before valuation is a real concern.
  • The only way to protect against upside risk is to own the market in a prudent way.
  • UK’s currency independence mitigates risk to EU and softens economic blow to Britain
  • Despite the low return, low growth world, markets continue to “climb a wall of worry.”
July 2016
  • A stealth bull market has frustrated the Bears as both stocks and bonds relentlessly rise in price in unison sending bond yields to historic lows
  • Britain, true to its motto, “Keep Calm and Carry On” has removed a lot of uncertainty as Theresa May takes the mantle of Prime Minister
  • Global Central Banks expected to ratchet up monetary accommodation
  • Despite the headwinds from negative corporate earnings the consumer remains resilient
June 2016
  • While U.S. markets continue to climb a wall of worry, many fretful investors have missed out as they await the pullback that never truly comes.
  • Recent data suggest the consumer will help rouse the economy from its first quarter sluggishness.
  • Given the impact that tightening would have on already-elevated global risks, we don’t expect a Fed rate hike this summer.
  • Broad, global diversification continues to shield investors from volatile markets, over both the short and long term.
May 2016
  • Increasingly accommodative central bank policies have inspired an astounding year-to-date reversal in global risk assets.
  • While rising asset prices haven’t had a meaningful impact on the real economy, there are hopeful signs of a potential second-half 2016 rebound.
  • First quarter corporate earnings growth has come in better than expected but is still on track to be negative for the fourth consecutive quarter.
  • Despite the lack of robust global growth, all asset classes are positive year to date, highlighting the importance of global diversification.

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