Thursday, May 2, 2019 » Investment Strategy Update, May 2019 Alternatives, Commentary Global Equities Rally: Global equities have rallied off the lows of December 2018, particularly U.S. equities, which have reached new highs. While the initial recovery was driven by attractive valuations, the dovish tone of global central banks has been supportive of equities moving higher as the interest rate tightening cycle has ended. This has resulted in a significant decline in global government bond yields. While lower bond yields are supportive of the equity risk premium on a global basis, the bond market and the equity market are sending contrasting signals. Bonds are pricing in much slower growth and inflation, and equities are pricing in optimistic expectations of future earnings growth, specifically in the U.S.
Tuesday, February 5, 2019 » Investment Strategy Update, February 2019 Alternatives, Commentary Discipline Outperforms Emotion: Global investor sentiment deteriorated in the fourth quarter of 2018, and the trend lower in risk assets escalated during the month of December as restrictive monetary policy began to weigh on sentiment and risk. Over the past two years, the Federal Reserve has been gradually and judiciously implementing a path to raising interest rates as the economy has demonstrated signs of stable economic growth. In 2018, the U.S. economy largely benefited from sizable tax cuts, predominantly in corporate taxes, which not only boosted corporate earnings but facilitated strong economic growth. It has yet to be seen, however, if the benefit of lower taxes will persist into 2019 and beyond, particularly in the face of tighter monetary policy.
Friday, November 9, 2018 » Investment Strategy Update, November 2018 Alternatives, Commentary Positioning for Volatility: Global investor sentiment began to moderate during the third quarter of 2018, particularly in the U.S., as growth equities rallied on strong earnings expectations and positive economic momentum supported demand for risk assets. Concerns about strong economic growth and inflationary pressures fueled a surge in bond yields late in the quarter, weighing on the rally for momentum stocks witnessed for most of the year and resulting in a meaningful correction in October. Enthusiasm about the new U.S. administration’s execution on tax reform and the immediate impact on the economy and corporate earnings continues to be clouded by concerns about trade policy.
Friday, August 10, 2018 » Investment Strategy Update, August 2018 Alternatives, Commentary Shortening Duration and Seeking Opportunity in Value, International: This quarter, we are remaining overweight to foreign equities, which we reduced early in the second quarter due to concerns about the headwinds of dollar strength, and slowing business momentum overseas. We remain consistent in our slightly cautious risk posture, favoring government bonds in our fixed income allocation and value in our equity allocation.
Monday, May 7, 2018 » Investment Strategy Update, May 2018 Alternatives, Commentary Positioning Defensively in Fixed Income and Equities: Global equity markets witnessed a dramatic spike in realized and implied market volatility during the first quarter of 2018, as sentiment quickly shifted on concerns of higher inflation (most notably wage inflation) and a higher likelihood of more interest rate hikes in 2018.
Tuesday, February 6, 2018 » Investment Strategy Update, February 2018 Alternatives, Commentary Positioning for Value: Global equity markets and risky assets alike surged higher in 2017 as earnings recovered, realized and implied market volatility tumbled to near-historic lows, and momentum and positive sentiment continue to propel valuations higher. Markets are very enthusiastic about the new U.S. administration’s execution on tax reform, which may help extend the rally in risk assets even further, provided that monetary conditions do not tighten too quickly.
Wednesday, November 8, 2017 » Investment Strategy Update, October 2017 Alternatives, Commentary Staying the Course: Global equity markets and risky assets alike have surged higher year-to-date in 2017 as earnings recovered, realized and implied market volatility tumbled to near-historic lows, and momentum and positive sentiment continue to propel valuations higher. Markets are once again pricing some additional enthusiasm about the new U.S. administration’s ability to execute on its policy agenda of lighter regulation and looser fiscal policy, however there remains significant uncertainty regarding actual policy implementation.
Thursday, August 3, 2017 » Investment Strategy Update, July 2017 Alternatives, Commentary Positioning for Relative Opportunities: Global equity markets continued to climb higher in the first half of 2017 as earnings recovered, and momentum and positive sentiment helped markets shrug off concerns regarding the new U.S. administration’s ability to execute on its policy agenda of lighter regulation and looser fiscal policy. We expressed our concern in our last letter that there remains significant uncertainty regarding actual policy implementation, noting that our analysis continues to focus on the fundamentals of the macroeconomic landscape, while considering how such fundamentals may change in response to policy actions. ...
Wednesday, May 3, 2017 » Investment Strategy Update, May 2017 Alternatives, Commentary Investment Strategy—Positioning for Relative Opportunities Global equity markets continued to climb higher early in the first quarter of 2017, on momentum and positive sentiment in response to the surprise election of Donald Trump. The market had been pricing in optimism regarding the new administration’s ability to execute on its policy agenda of lighter regulation and looser fiscal policy. However, markets were met with resistance mid-quarter on the heels of a failed health care vote and the realization that future policy actions may be less certain. We expressed our concern in our last letter that there remains significant uncertainty regarding actual policy implementation, noting that our analysis continues to focus on the fundamentals of the macroeconomic landscape, while considering how such fundamentals may change in response to policy actions.
Friday, February 10, 2017 » Investment Strategy Update, February 2017 Alternatives, Commentary Investment Strategy—Proceeding With Caution U.S. equity markets rallied in the fourth quarter of 2016, on the heels of the surprise election of Donald Trump. Some aspects of the new administration’s policy agenda may foster higher economic and earnings growth (regulation and fiscal policy), while other aspects may prove to be prohibitive of growth (immigration and trade). Markets moved quickly to price-in the positive features of President Trump’s expected policy actions, with less attention to the potentially negative consequences. Recognizing that there remains significant uncertainty regarding actual policy implementation, our analysis continues to focus on the fundamentals of the macroeconomic landscape, while considering how such fundamentals may change in response to policy actions.