Economic Outlook

A Turning Point For Global Monetary Policy

It’s always different.

Though many of the ingredients for economic growth and inflation are always present, they’re typically mixed in the economic soup in different measures from cycle to cycle. The current recovery from an unprecedented housing crisis and recent moderate use of debt by consumers is unique and alters the entire growth landscape, making it a rather complex one.

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Equity Portfolios

Party Like It’s 1999

Our readers have heard us say of late that the combination of rich valuations and uncertain earnings growth has gradually led us to a greater emphasis on capital protection. Far from a cry of fear, this is an expression of sobriety, as we seek to balance participating in growth with a respect for things that go wrong – even if that can take time.

In fact, our moderation has still left us overweight to even weight in U.S. large-cap stocks and overweight in non-U.S. equities. Rather, we’ve reflected our caution where we feel valuations are most stretched – and we find small-cap stocks as most egregious on that score.

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Fixed Income Portfolios

Central Banks Normalizing Though Inflation Moderates

The Fed remains the elephant in the room. For now, a majority of Fed FOMC members still expect higher inflation as the labor market tightens. In their June meeting they raised the target rate another 25 bps and rolled out a map for balance sheet normalization. However, renewed moderation in both headline and core inflation numbers in recent months boosted the bond market. This is a tricky environment. We just experienced QE for the first time in our lifetime and are about to experience QT (quantitative tightening). We believe it’s a good strategy to keep a medium-term horizon while staying nimble strategically.

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