Markets Recover from Early Quarter Selloff
In Defense of the Economic Recovery...
Municipals Turn In Strong Quarterly Performance
Innovation Is Alive and Well in the U.S. Economy
Dollar’s Quarterly Decline Is Worst in Years
From the Desk of
GARRETT D’ALESSANDRO, CFA, CAIA, AIF®
After what the media repeatedly trumpeted as the worst-ever start to a new year, equities rebounded to finish the first quarter slightly ahead and once again deliver the lesson that maintaining a long-term perspective is essential to successful investing. As we have stressed, volatility is part and parcel of today’s markets, something to be monitored carefully, but certainly not a determinant of strategy.
As the recent volatility indicates, many investors are nervous. They are concerned about geopolitical developments, monetary policy, uneven corporate earnings, an aging economic recovery and bull market, an unusual – to put it mildly – election year, and a nagging feeling that the U.S. economy just isn’t firing on all cylinders.
Without making light of those concerns, our view is that the U.S. economy is performing relatively well, all things considered, that high-quality companies are continuing to innovate – especially in the digital space – and that the rise in interest rates is likely to be gradual and judicious. Overseas, the ongoing and increasing reliance on central banks to maintain economic growth is worrying, especially since no one knows what the long-term repercussions of negative interest rates may be. Europe, China, and Japan all face significant challenges that will take time to resolve and the outcomes may be hard to predict. Although their specific issues are different, the same is also true for emerging market economies.
In terms of what continues to be sluggish economic growth in the U.S., it is worth remembering that longer can be a corollary of slower. An environment of low interest rates, subdued inflation, lower energy prices, expanding payrolls, higher household net worth, and rising consumer confidence is simply not a recipe for recession. Although growth in overall corporate earnings in 2016 is unlikely to be robust, there are opportunities in both the equity and fixed income arenas that can be identified through fundamental research and leveraged with astute investment management.
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