Investment Management

A look at the second quarter of 2017.

Executive Summary:

  • Let’s go to the videotape! Markets performed well in Q2 posting positive returns globally. Similar to recent quarters, the positive performance was not confined to stocks as returns were broadly strong across asset classes.
  • Normalization. The path toward normalization of interest rates continued in the quarter with the Federal Reserve raising the federal funds rate at its most recent meeting. Ultimately, there is concern that higher interest rates will have a negative impact on a variety of asset classes, most notably equities.
  • What could go wrong? With the unemployment rate at 4.3% the labor market is tight, suggesting an acceleration in economic activity from here could push up wages and inflation. While rising wages have yet to translate into higher inflation, the Fed may be facing an economic inflection point where accelerating growth and inflation will require a more aggressive policy response than current expectations.
  • Market timing is difficult. There is a dramatic difference in performance over the last twenty years between being fully invested versus trying to time the market. Thoughtful asset allocation and risk management allows for longer term planning and less emotional investing.

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