THIS ISSUE

  • Stocks Regain Footing to Post Second-Quarter Gains
  • What the Digital Revolution Means for Equities
  • Outlook for Municipal High Yield Still Favorable
  • Economy on Solid Footing as Second Half of Year Begins
  • Corporate Credit and Emerging Market Debt Offers Opportunities

Investors are – as they should be – clearly focused on the future, ignoring what turned out to be a dismal first quarter and instead recognizing widespread signs that the economy is picking up strength. Such strength and momentum is the cornerstone of our Gaining Altitude thesis. Investor focus was reflected in a 5.2% gain for U.S. equities in the second quarter (S&P 500), with a number of other asset classes also advancing. Companies are hiring, fostering increased confidence among consumers who have largely repaired their personal balance sheets and are increasing their spending; manufacturing output is up, credit growth is accelerating, interest rates are at historic lows, and the world’s central banks remain accommodative. Perhaps best of all, we believe this economic expansion still has plenty of room to run.

Of course, equities have already posted a remarkable advance over the past five years, with the S&P 500 essentially tripling off its 2009 low, which naturally raises the question of whether stocks are currently overvalued. While a market correction is likely at some point, we do not think stocks are at unreasonable levels, provided investors maintain a long-term focus and stay within their personal tolerance for risk. In fact, we see attractive opportunities in a number of areas, including certain sectors of the high-yield arena as well as among technology firms that are at the forefront of what has been termed the “digital revolution.” With technology, as with all companies, careful stock selection driven by in-depth fundamental research is crucial.

In addition to insightful reviews of the current economic outlook and overall investment environment, this issue of the Quarterly Update also delves deeper into the digital revolution, examines potential opportunities in corporate credit and emerging market debt, and answers questions we are hearing from clients about the municipal high-yield sector, which has attracted interest among investors impacted by higher tax rates.

Our relationship with you is very important to us. 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.

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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. The content presented is based upon information received from sources City National Rochdale considers reliable. 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 on as of the date of this document and are subject to change.