Economic activity is gaining momentum both home and abroad. Consumer and business sentiment indicators are rising, corporate earnings growth is expanding and, while inflation is picking up, it is not yet problematic. Fiscal policy in the developed world will most likely continue to be expansionary and monetary policy, on balance, should remain accommodative. All of these developments are positive for risk assets.
Category: General (Page 15 of 17)
With a lot of pauses and surprisingly few real corrections, the US equity market has ground steadily and dramatically higher since the trough of the financial crisis in March of 2009. In our 9th year of this climb, investors think less about that looming “what if”, but the question still remains. Andrew Jones of CityWire USA put the question to some great gatekeepers and strategists across the industry, including Gene Goldman from Cetera, Ted Dimig from JPMorgan, Ray Joseph from UBS, and Bryan Luebbert from Edward Jones, and in that august company, Wilde Capital Management. You can read the whole article here, and our perspective here.
To no surprise, the Federal Open Market Committee (FOMC) voted to raise the Federal Funds rate by 0.25% to a range of 0.75% – 1.00%. Fed officials have been telegraphing this increase for a number of weeks and Fed watchers felt it was a certainty as the meeting approached. That certainty should have been priced into markets but the second rate increase in the last three months still boosted markets as the S&P 500 Index added almost 20 points to 2,385. On the fixed income side, Treasuries rallied with the yield on the 10 year Treasury falling by over 10 bps to 2.49%. Investor action was most likely driven by further proof that the Fed is on track to normalize interest rates as the economy prospers. However, a review of the Fed’s statement showed little to no change to interest rate and economic forecasts. The Fed seems content to take a gradual approach in its rate policy, which is all fine and good for market participants. As we enter the ninth year of this market cycle, with job growth continuing and inflation in check (albeit close to the Fed’s stated target of 2%), a slow and steady hand on the tiller gives comfort. And to calm those investors concerned that the Fed may be entering a new, more aggressive phase of policy action, Janet Yellen stated in her press conference that the Fed expects to remain accommodative for “some time”.
Happy International Women’s Day. Market watchers and fundamental investors take note. The economic significance of women globally should not be underestimated. There are numerous articles today on Bloomberg and other outlets enumerating the figures which we do not need repeat here. This post is to assert our view that to allocate capital across markets without attention to the realities of gender equality and diversity is to miss a critical part of the risk and return thesis for any investment.
Today is an opportunity to get more involved in participating in and shaping that reality. In addition to being a day of recognition this is also a day of challenge to the status quo through the “International Day Without a Woman”. But, how do we create lasting change for women and fully open markets to the possibilities beyond tomorrow morning’s headlines?
For anyone in a position of privilege and power, or anyone in a position to speak to that position, be advocates for gender equality and inclusiveness through engagement. The esteemed organization Catalyst puts out an excellent resource guide that can help foster this type of engagement that we recommend reading and sharing. Aside from being the right thing to do, paying attention to these important issues is virtuous from an investor’s perspective. Board and leadership diversity, equitable pay and career advancement are hallmarks of great companies that understand how to fully and effectively utilize human capital to unlock business value. Women are also increasingly not just major contributors to but the key decisionmakers around family wealth. Starting or advancing the conversation on gender equality and diversity is good for capital formation, wealth creation and legacy building. Give people the tools and language to start effecting durable change:
February delivered strong returns in several areas of the world’s capital markets with the exception of key European equity and credit markets.
What we heard last night from President Trump’s address to a joint session of Congress may point to significant opportunities for price improvement in the US equity markets. However, the policy priorities Mr. Trump outlined are fraught with internal conflicts that may be difficult to resolve in the process of translating ambition into legislation. More concerning for us, this package of priorities taken together could create the environment for a market bubble by taking from the future to fund the present.
January was a month of catch-up among many of the international markets that lagged towards the end of last year. Non-US asset classes generally outpaced US equities and bonds while precious metals posted the strongest returns.
On Friday, the Trump administration issued a memorandum asking the Department of Labor to review the so-called “fiduciary rule” governing retirement savings and investment accounts before its implementation in April of this year. Washington DC and regulation being what it is, for all intents and purposes this indefinitely stays the rule. According to a news release from the DOL’s Acting US Secretary Ed Hugler “The Department of Labor will now consider its legal options to delay the applicability date as we comply with the President’s memorandum.”
It is important to note that, despite a lot of hand-wringing from the press, lobbyists, politicians, financial institutions, investor protection groups and other stakeholders on both sides, the rule had not yet gone into effect, so this step more or less maintains the status quo. While we are hopeful in the long term that legislators, regulators, financial consumers and industry participants will come to terms on an approach to rulemaking which adequately serves the needs of retirement investors and hopefully all investors, our focus is on how those investors are served today. Continue reading
Yesterday, with the usual fanfare and breathless commentary from the financial media, the Dow Jones Industrial Average, the dean of US equity indexes, crossed 20,000 points. Is this significant, and if so, where does the market go from here?
In short, no, on its own it is not significant. Market watchers imbue these big round numbers with magical properties, but there really is nothing intrinsically wonderful about 20,000. Numbers that were more important in recent months and years were 18,000 (rounded), which the DJIA could not seem to shrug off from late 2014 until just this past October, and 16,000 (also rounded), which the average kept revisiting from as long ago as late 2013. That represents about 12.5% of return that kept coming and going for more than two years. The meaningful moment was when the DJIA broke out of that band in early November of 2016 and never looked back at it. Continue reading
As we look forward to 2017, we see selective opportunities for positive returns across risk assets, with a continuing preference for the United States. Our optimism is tempered by the recognition that it is highly dependent on the actions of President-Elect Donald Trump and the Federal Reserve, and the growing influence of populism globally. In formulating our views, we continue to reflect on what dominated the headlines and drove markets over the past year. 2016 got off to a very rocky start with the MSCI World Index falling by 2 percent on the first day and U.S. equities recording the worst-ever start to a year. Concerns about the Chinese economy sent global markets into a tailspin. But at the risk of overusing a tired turn of phrase, it was a “tale of two markets” as trends reversed in the second half of the year, as investors moved past the surprising results of the Brexit referendum and Mr. Trump’s presidential victory to push indexes to new highs. To wit, several of these market drivers may prove to be prologue to what unfolds in the New Year.
Click here to read the full report: WCM 2017 Outlook