In our view, the prospective low-return environment calls for a capital-efficient approach that pairs actively managed bonds with passive or enhanced equities in target-date, core and retirement-income allocations.
Successful investing in this cycle has depended largely on following the business cycle and ignoring the myriad of fears. As the economy enters a late-cycle phase, investors need to recognize the characteristics of a late-cycle environment and how to accordingly position portfolios.
Going into Federal Reserve Chair Janet Yellen’s 32nd and final meeting, neither we nor the markets expected the Fed to make much news. Of note, however, in its statement after the meeting on 31 January, the Fed acknowledged recent firmer economic data and expressed confidence in inflation moving toward the 2% target later this year.
In the 9th year of this bull market, investors remain overweight bonds in an environment poised to drastically limit fixed income returns. It’s time to avoid bonds’ day of reckoning.
The fourth quarter of 2017 closely resembled much of the first three quarters – global markets continued to grow steadily, resulting in positive returns for many strategic domestic and global equity investors.
Despite a rate hike, monetary policy remains accommodative.
2017 turned out to be a better year for the stock market than most investors surmised. For 2018, we yet again see investors avoiding one of the longest post-war bull markets in history and continuing to ignore the fundamentals driving markets higher.
The U.S. economy is shifting from reflation to inflation – and we have greater confidence in inflation returning to its medium-term trend and the Federal Reserve’s target. Better wage growth and potential fiscal stimulus should cement this transition.
The current equity bull market has been chugging along, enjoying unusually low volatility in recent quarters. The S&P 500® Index is on an extended bull run. The index hasn’t had so much as a 5% correction since February 2016, and it has gone without a 20% or greater pullback since March 2009.
While Tech remains one of RBA’s largest overweight sectors in our portfolios, one thing to consider is the sector’s dirty little secret: it’s really a deep cyclical.