• Markets Struggle in Choppy Seas in First Quarter
  • Outlook Remains Positive Despite Weak Start to the Year
  • What a Rising Dollar Means for U.S. Equities
  • The Fed’s Impact on Foreign Currencies
  • Oil Prices, Economic Implications, and Portfolio Positioning

From the Desk of Garrett D’Alessandro, CFA, CAIA, AIF®

Volatility returned in a big way in the first quarter. The S&P 500 and Dow Jones Industrial Average Index briefly posted new highs before both slid more than 2% from their peaks to finish essentially where they started. Investors found plenty to worry about, including a surging dollar that stoked fears about profits at manufacturing and multinational corporations, and more hints that the Fed is getting closer to raising rates. Other concerns included slower economic growth in China, widening conflicts in the Middle East, and the ripple effects of sharply lower oil prices on the energy sector.

While we would not be surprised to see volatility persist throughout the year, we remain positive on the U.S. economy and the potential for further equity gains. Companies are hiring and raising wages (the disappointing March employment report is likely to prove an anomaly), consumer confidence is climbing, gasoline prices are staying down, the U.S. Leading Economic Index (LEI) has risen for 13 months straight, and both inflation and interest rates remain low. We are also seeing some encouraging signs in Europe, where the European Central Bank’s quantitative easing program has boosted equity prices.

The bull market marked its sixth anniversary during the quarter, and while valuations are elevated, we believe they are not outlandish. Although this is one of the longer bull markets on record, bull markets do not die of old age – they are brought down by recessions, something we simply do not see on the horizon at present. We also do not expect a sharp or precipitate rate increase from the Fed, which is fully aware of the need to move deliberately. U.S. economic growth is gathering steam, and while that growth may be lower than many would like, lower can also mean longer.

With that being said, the Fed – and other central banks – are eventually going to have to normalize rates, which is going to be a delicate task indeed. There are also a number of geopolitical issues that could disrupt markets, and rest assured that we are monitoring them closely. Our overall stance is positive but vigilant.

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Important Disclosures

The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. This presentation is not an offer to buy or sell, or a solicitation of any off er to buy or sell, any of the securities mentioned herein.

Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results and are based primarily upon a hypothetical set of assumptions applied to certain historical financial information. Certain information has been provided by third-party sources and, although believed to be reliable, it has not been independently verified, and its accuracy or completeness cannot be guaranteed.

Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as on the date of this document and are subject to change.

There are inherent risks with equity investing. These risks include, but are not limited to, stock market, manager, or investment style. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. Investing in international markets carries risks such as currency fluctuation, regulatory risks, and economic and political instability. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume.

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Investing involves risk, including the loss of principal. Diversification may not protect against market loss or risk.

Past performance is no guarantee of future performance.

The Standard and Poor’s 500 Index (S&P 500) is a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. Dow Jones Industrial Average Index is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.

Leading Economic Index (LEI) is a composite index of 10 underlying economic indicators used individually or together to predict a change in the economic cycle.

Purchasing Managers Index (PMI) is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries, and the employment environment.

Core Personal Consumption Expenditures Price Index (core PCE) is the personal consumption expenditures (PCE) prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends.

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