Q1 2018 Market Summary

Our detailed quarterly commentary is available here.

The first quarter of 2018 started off strong. The markets were supported by positive and broad-based economic data, solid corporate earnings reports, and the approval of a major tax reform package. However, February and March saw volatility sweep in as the likelihood of inflation became more realistic, and trade tariff concerns surfaced. After rising about 6% in January to record highs, equity markets suffered a 10% correction. We believe market volatility will continue as sentiment sorts out the benefits of tax cuts against the risks of international trade agreements, both within a rising rate environment.

On the fixed income side, we saw interest rate increases across all maturities. The 3-month Libor rose considerably, reflecting the actual and increased expectations of Fed tightening. The rate rise is being driven by (1) strong employment with newly apparent increasing wage pressures, (2) most key inflation measures moving to, and through 2%, (3) strong corporate earnings and equity market prices, (4) significant fiscal stimulus, (5) pro-growth policy shifts, and (6) global economic growth. Floating rate notes performed well in Q1 and over the past year as coupons adjusted upward with stable prices in the rising rate environment. Our fixed income portfolios benefitted significantly from our overweight position in floating rate notes.

As investors, we are seeing the positives of a growing economy and tax reform. However, the positives are coupled with some risks which include inflation and tariff/trade agreements. Our investment discipline is designed to take advantage of the opportunities that market risk and volatility create.

 

 

Q4 2017 Market Summary

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. 

Q3 2017 Market Summary

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.

Q2 2017 Market Summary

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.

Q1 2017 Market Summary

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.