After a long period of “riding the wave” of central bank liquidity, investors are now confronted with much more difficult decisions. Andrew Lo’s new book, Adapative Markets, provides an excellent framework from which to analyze the current situation, evaluate market risks and prepare for changes.

We’re in a late-cycle, momentum-driven market, where valuation is at an extreme. Momentum can drive markets beyond fundamentals for an extended period. No investment process is going to pick the peak in the cycle, but we’d lean out as the risks increase.

K2 Advisors seeks to add value through active portfolio management, tactical allocation and diversification across four main hedge strategies: long short equity, relative value, global macro and event driven.

We update our geopolitical outlook for the remainder of the year. This report is less a series of predictions as it is a list of potential geopolitical issues that we believe will dominate the international landscape for the rest of the year.

Stocks turned in a strong performance in the front half of 2017 despite geopolitical and monetary policy risks. The question, of course, is whether this performance trend can continue in the second half. I believe these two risks will cast an even longer shadow over markets going forward — making concepts such as diversification and risk management even more important for investors’ portfolios.

This article explores the value of understanding and assessing the environment over your investment horizon. Market weather may be hard to predict, but market climate can be credibly determined.

Performance in the bond market in the first half of 2017 was characterized by a lack of inflation, optimism about economic growth reflected in both equity markets and credit spreads and a seemingly insatiable demand for yield.

Despite a weak first quarter, the second quarter has looked good, and signs are pointing to a solid remainder of the year. Recent data has shown an expanding economy, while companies have grown both their top and bottom lines. Markets around the world have reacted to this by rising substantially, and we’ve continued to hit new highs here in the U.S.

As investors increasingly trust that the economy can stand on its own without the need of monetary policy support, business fundamentals should take over as the primary market driver.

We say goodbye to the first half of a tumultuous, but rewarding, year and look ahead to the second half to see what might be in store for the U.S. economy and stock market.

Recent economic data reports have helped to fill in the picture of the economy in the first half of the year. However, investors should be more concerned with the prospects for the second half of the year.

The remainder of 2017 promises to be eventful. The following are key themes we will be watching in the months ahead.

The Trump “reflation trade” is being undermined by the new administration’s failure to enact planned legislation like the ACA repeal, tax cuts, and the border adjustment tax. Following the March 0.25% hike in the US federal funds rate, the Fed will likely raise interest rates twice more in 2017, taking the target range to 1.25% to 1.50% by the end of the year. In the Euro-area the near-term environment will continue to be dominated by politics with upcoming elections in France and Germany, all against the backdrop of extended negotiations over Brexit.

During the first quarter of 2017, the stock market (as measured by the S&P 500 Index) enjoyed a 6.07% total return. The gains reflect (1) the steady, persistent, non-inflationary economic recovery that has characterized the post-2008 period and (2) investor enthusiasm for President Trump’s pro-business, pro-growth policies.

The world’s major economies have performed quite well in recent months despite the influence of political and policy upheaval. Brexit and the outcome of the U.S. election have yet to produce the negative outcomes some had feared.

As we close out the first quarter of 2017, all I can say is that it’s been a great one, economically and financially. Despite all of the worry and turmoil—in Washington, DC, and elsewhere in the world—markets have risen substantially and the economy has continued to grow.

Our global team of investment strategists warn that investor expectations have run ahead of market fundamentals in the global equity markets. They maintain a call for caution as inflated expectations for global growth and U.S. fiscal policy drive markets higher, despite looming global economic headwinds.

Just as I do with the economy, I review the market each month for warning signs of trouble in the near future. Although valuations are now high—a noted risk factor in past bear markets—markets can stay expensive (or get much more expensive) for years and years, which doesn’t give us much to go on timing-wise.

Although global equity markets have rallied recently, some investors may feel unsettled about the changes occurring in many parts of the world—and what those changes could mean for their portfolios.

The search for investment portfolio returns is not going to get any easier in 2017 against a backdrop of record U.S. equity prices, narrow credit spreads and low bond yields.

Longer-term bond yields are near their highs for this cycle, while the environment for riskier assets like high-yield bonds, bank loans and stocks remains positive.

Based on the little substance that emanated from the presidential campaign, it is almost impossible to game the precise market and economic policy implications of a Trump presidency. What there is to guess at suggests possible gains for the financial sector, companies leveraged to infrastructure, and healthcare companies, should there be dramatic reform to the Affordable Care Act.

Certain economic concepts have been a source of frustration to investors over the years. The movement of bond prices up or down to bring existing bonds in line with prevailing interest rates would be one example.

As we enter 2017, there is a long list of issues that could affect alternative investments: policy changes in the US, elections in Europe, rising rate expectations and more. Given this changing landscape, I would like to highlight some alternative investments that I believe have the potential to benefit investors in the new year.

As we’ll see, a great deal will happen in the first third of the year that could (and likely will) radically change the course of events in the last two-thirds. Furthermore, the possible outcomes are in the hands of inherently unpredictable individual humans otherwise known as politicians (and not just in the US, thank you very much!) instead of dispassionate market forces. Fancy quantitative models will be of little help.

The policy backdrop in the US will be particularly favorable for the economy, with looser fiscal policy, relatively easy monetary policy and a less stringent regulatory environment. Their eight-year US preeminence theme is intact and continues into its ninth year. While President-elect Trump’s initial policy measures with respect to tariffs and trade agreements risk jolting financial markets, he will likely adjust and change course as necessary to achieve his desired results.

In conjunction with the publishing of a summary of Schwab's 2017 outlook across asset classes; this report is a more detailed summary of my 2017 outlook, with a dash of rear-view mirror analysis of the year just ended. Each of the broad topics discussed below will be further unpacked over the next couple of months in individual reports.

As we always do in January, this month we focus on the investment minefield laid out in front of us and we argue that with upcoming elections in the Netherlands, France and Germany, and economic uncertainties globally, this year could turn into a rather tricky one for investors. There are reasons to be optimistic, however, and we hope that 2017 will be a prosperous year for you all.

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.