Markets Mark Time in Second Quarter
U.S. Economy Continuing to Gather Strength
Choppy Seas Thesis: U.S. Stocks Preferred
Roller Coaster Ride in China’s Local Equities
Outlook for Fixed Income Remains Positive; Gradual Rate Hikes Expected

From the Desk of 

As the first half of the year came to a close, markets continued to struggle with uncertainties that have persisted since the beginning of 2015. Stocks made no real headway, but also did not fall into the correction many had been predicting. Fixed income securities declined, as the Fed made it clear that interest rates would be going up, albeit very gradually. Overseas, the Greek drama dragged on, with various twists and turns, and no real resolution in sight.

At times like these, when markets are exhibiting no clear trend and many headlines seem focused on negatives, it is important to remember what’s really happening in the U.S. economy: it is continuing to expand and gather momentum. Although the expansion is, and may continue to be, slower and more uneven than we might like, it is real. And while we are now six-plus years off the end of the recession and bear market lows, both were generational events, not your garden-variety cycles. In other words, a slow, halting recovery was always in the cards.

What happens from here hinges on such factors as the skill and speed with which the Fed extracts itself from zero-bound interest rates, how well corporations cope with a dollar that is likely to remain strong, and wage pressures that – while still minimal – seem inevitable, in addition to exogenous events whose impact is impossible to gauge. We may have more choppy seas ahead, but considering those we have already navigated through, companies and consumers are right to be increasingly confident about the future.

While the price gains we have seen over the past few years are not likely to be repeated, we remain positive on select U.S. equities and fixed income vehicles. We would not be surprised to see market volatility as investors react to Fed actions or events overseas. This may present opportunities, and when we have high-conviction opinions about certain securities, we will act. Our stance is steady as she goes, with a watchful eye on the horizon.   

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City National Rochdale, LLC is a Registered Investment Advisor and wholly owned subsidiary of City National Bank.

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• 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 fi xed income investing. These risks may include interest rate, call, credit, market, infl ation, government policy, liquidity, or junk bond. When interest rates rise, bond prices fall.

The yields and market values of municipal securities may be more aff ected by changes in tax rates and policies than similar income-bearing taxable securi-ties. 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.

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

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.

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.

Shanghai Composite Index (SHCOMP): A capitalization-weighted index. Th e index tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange.

Shenzhen Composite Index (SZCOMP): An actual market-cap weighted index (no free float factor) that tracks the stock performance of all the A-share and B-share lists on Shenzhen Stock Exchange.

MSCI China Index (MXCN): A free-float weighted equity index. It captures large and mid-cap representation across China H shares, B shares, Red chips and P chips.

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