Rising volatility and yields. Toppy valuations. Global policy uncertainty. To handle these bumps in the road, investors need to build a better return path focused on strong up/down capture. Further, we see seven key themes affecting that path ahead.
While many investors ascribe recent market performance solely to a post-election surprise, we argue that there’s a simpler explanation. Remember, it’s checkers not chess.
Many had not expected the minutes of the 14 December 2016 Federal Reserve meeting released this afternoon to make much news.
The fourth quarter of 2016 was a profitable period for globally diversified multi asset managers. All major domestic large cap indices were up for both the quarter and the year.
Policymakers may have to juggle a rising dollar, higher yields and a lag in any Trump stimulus.
While most observers had expected correctly that the Federal Reserve would hike interest rates by 25 basis points today – markets had priced in literally a 100% chance – they did not think the Federal Open Market Committee (FOMC) would materially change its September projection for two hikes in 2017.
2017 is all about inflation. As many investors hold onto the notion of “lower for longer”, we recognize that re-inflation will likely take hold in the New Year and those positioned for an improving global economy will benefit.
The minutes reveal a committee that had expected to hike at the meeting on December 13-14. Developments since could only have strengthened the case.
Fears of a repeat 2008 bear market are causing many investors to remain wallflowers during the second longest bull market of the post-war period. We argue, this fear is unfounded and the opportunity cost of avoiding equities keeps growing and growing.
Last month, when the minutes from the Federal Open Market Committee (FOMC) meeting in September were released, they revealed that the decision not to hike the policy rate was a close call.