After the recent correction and with the breadth of our asset allocation research still favoring equities, we are rebuilding an equity overweight, primarily using U.S. large-cap stocks. While the Fed heads toward the exit, the European Central Bank is planning to provide further monetary easing and the Bank of Japan is continuing to expand its
Insights on current market events and investment opportunities.
The market’s extended period of low volatility was shattered in the past month. While it is possible fear-driven selling could resume or accelerate, we do not believe this is the most likely outcome. Given the U.S. economy’s reasonably good fundamentals, we believe that patient investors will get more treats than tricks in the future. As
The U.S. dollar could continue to perform well, but there is a short-term case as to why dollar strength could be accompanied by more asset class volatility. Currency markets are moving ahead of what interest rate markets are telling us, so there is a disconnect. Things could become very challenging for the Fed if the
Markets are now asking what happens if growth slows again in the U.S. and/or weak and slowing growth in Europe, Russia and China drags down U.S. and U.K. growth? The stock market downturn is a reaction to changes in growth expectations and the volatility of that growth. Market assumptions for steady growth did not necessarily
While consensus suggests a slightly better than average chance of a GOP takeover, battle for control of the U.S. Senate is going to be a dramatically close call. When we examine how a GOP win might affect industries such as energy, healthcare and defense, it’s not as black-and-white as some people might think. One of
The Fed (and all central banks) is highly sensitive to shifts in inflation expectations by either consumers or the markets. The one-year TIP breakeven appears to be pricing in some deflationary pulse and is also pulling down longer term inflation expectations across the curve. My expectations for growth are unchanged at 2.5%-3.0%, but I am
Financial markets are now questioning the time limit on an infinite QE policy and what lies beyond its expiration. While volatility and corrections are unpleasant, they can motivate investors to focus on fundamental issues such as capital investment and labor productivity. The transition from our focus on extraordinary monetary policy may be painful, but it