THIS ISSUE

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.

We value your relationship and welcome hearing from you. If there is something you would like to discuss, please contact your advisor or portfolio manager. If I can be of assistance to you, please contact me directly at garrett.dalessandro@cnr.com.

Investment and Insurance Products: 
• Are Not insured by the FDIC or any other federal government agency 
• Are Not deposits of or guaranteed by a Bank or any Bank Affiliate 
• May Lose Value

 

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 offer 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, economic and political instability. Emerging markets involve heightened risks related to the same factors as well as increased volatility, lower trading volume, and less liquidity. Emerging markets can have greater custodial and operational risks, and less developed legal and accounting systems than developed markets.

There are inherent risks with fixed income investing. These risks may include interest rate, call, credit, market, inflation, government policy, liquidity, or junk bond. When interest rates rise, bond prices fall. The yields and market values of municipal securities may be more affected by changes in tax rates and policies than similar income-bearing taxable securities. Certain investors’ incomes may be subject to the Federal Alternative Minimum Tax (AMT) and taxable gains are also possible. Investments in below-investment-grade debt securities and unrated securities of similar credit quality, commonly known as “junk bonds” or “high-yield securities,” may be subject to increased interest, credit, and liquidity risks.

Investments in emerging markets bonds may be substantially more volatile, and substantially less liquid, than the bonds of governments, government agencies, and government-owned corporations located in more developed foreign markets. Emerging markets bonds can have greater custodial and operational risks, and less developed legal and accounting systems than developed markets.

As with any investment strategy, there is no guarantee that investment objectives will be met, and investors may lose money.

Returns include the reinvestment of interest and dividends.

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.

Index Definitions

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.

The MSCI Emerging Markets (EM) Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets.

The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. As of June 2007 the MSCI EAFE Index consisted of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The Barclays Aggregate Bond Index is comprises U.S. government, mortgage-backed, asset-backed, and corporate fixed income securities with maturities of one year or more.

The Barclays U.S. Municipal Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed tax exempt bond market. The index includes state and local general obligation, revenue, insured, and pre-refunded bonds.

The Barclays U.S. Municipal High Yield Index measures the non-investment grade and non-rated U.S. dollar-denominated, fixed rate, tax-exempt bond market within the 50 United States and four other qualifying regions (Washington, DC, Puerto Rico, Guam and the Virgin Islands).

The Wall Street Journal Dollar Index (WSJ Dollar Index) is an index (or measure) of the value of the U.S. dollar relative to 16 foreign currencies.

Indices are unmanaged, and one cannot invest directly in an index. Index returns do not reflect a deduction for fees or expenses.