Economic Outlook

Uncertainty About Economic Pace Heightens

Just as the economy was showing a spring in its step – averaging 3.4% in the second half of last year – a severe winter tightened the reins of growth. Or was it the weather? That became the much-debated question.

The Fed is voting with its wallet. It has continued “tapering” quantitative easing by reducing the pace of monthly purchases of various bonds. This points to its conclusion that the pace of growth is sustainable, in the U.S. and beyond. It’s also exactly the right thing to do, from a medium-term perspective, if the Fed is to achieve a graceful exit from the most significant stimulus in decades.

Download PDF

Equity Portfolios

Catching A Breath

After a five-year marathon of strong results, and a near 30% sprint in the recent year, the market slowed to a normal jog in the first quarter. Its return of around 1.5% (broad market) should be viewed as strong and normal, but after recent years’ stellar results, questions around earnings growth and a winter downshift in demand, it’s probably another source of worry to some.

Ironically, we think there’s a growing risk that we could see a mirror image of recent years, when tepid economic growth coexisted with strong equity markets.

Download PDF

Fixed Income Portfolios

Calm After The Storm, And Before Another Storm?

As investors have come to understand and accept both the plan for, and the wisdom of, tapering, fixed-income markets have stabilized. But we anticipate that expectations will continue to shift depending on data releases.

Over our investment horizon of 12-24 months, there is a risk of rising interest rates, driven both by relatively unattractive yield levels in high-quality bonds relative to their fair value as well as emerging higher inflation. Should it happen, it would likely be the result of intentional Fed actions and could shake some investors.

Download PDF