As we have communicated previously, we have felt since early last year that the economic fundamentals were on solid ground and accelerating. This outlook has been bolstered by a strengthening corporate and consumer sector, and fiscal stimulus (passage of the tax package), giving the equity markets fundamental support. Our interest rate strategy has been defensive, as we have felt the market was not pricing in enough tightening by the Fed and was underestimating the risk of rising long-term interest rates. As you will see in the attached market review and outlook (click here), we remain constructive on the markets in the long-term, but must consider the fact that interest rates will rise, will generate higher volatility and will challenge equity markets at times.
Click here for our detailed third quarter commentary.
Economic growth and continued easy monetary policy propelled equity markets to record high levels, and tightened credit risk premiums in Q2. The US and Global economic growth has become broad based and continues along a steady moderate growth that may be self sustaining. The IMF recently raised its forecast for global growth to 3.7% in 2018. Risk was rewarded as growth-oriented stocks, along with European and Emerging markets were the better performers fore the quarter, while Corporate bonds, including High Yield and adjustable rate bonds, performed well. Short term interest rates rose to the highest levels since 2008 as the Federal Reserve confirmed plans to tighten a third time in 2017 and three more in 2018, and began to gradually reduce its balance sheet, unwinding QE.
Click here for our detailed commentary for the second quarter.
Despite an uptick in volatility, equity markets continued to push higher in Q2, reaching new highs amid steady economic growth and inflation. Stock market gains were led by growth oriented technology shares, while global equities gained on continued growth overseas. The yield curve continued to “twist” with short term interest rates rising, reflecting the additional Fed tightening while longer term rates fell amid delays in implementing the new administrations policies.
Click here for our detailed market overview for the first quarter.
The US Economy continues along a steady moderate growth path, with low volatility in financial markets. The first quarter of 2017 saw equity markets move higher in the wake of Presidential and Congressional elections, although gains moderated in March when actual policy debates took place. Risk was rewarded as growth oriented stocks, along with European and emerging markets were the better performers fore the quarter, while High Yield, Inflation-Protected, and Adjustable Rate bonds out-performed.