Category: Markets

2024 Investment Outlook

If ever there was a period that demonstrated how the stock market interpreted the phenomenon of an economic cycle, it was the past two calendar years. Largely driven by interest rate policy from our Federal Reserve, both stocks and bonds have retraced and advanced, gaining little ground since the end of 2021. But while investment performance may have been largely muted, the economic and geopolitical environment underpinning financial markets has been tumultuous. In this commentary, we will explore the lasting impacts of the pandemic era, where we currently sit in the economic cycle, and the implications for portfolio positioning going forward.

2023 Mid-Year Update

In our last commentary, we suggested that a higher-for-longer interest rate environment, flattening global growth, and fears of an impending recession would put pressure on equities over the short-term. While we still hold that perspective, we were clearly a bit early in expressing that view and have been a bit surprised by the level of optimism and enthusiasm of late. The tug-of-war between fundamental investors respectful of traditional econometrics, and momentum strategies that embrace a psychology of exuberance and complacency with risk, has favored the latter.

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2023 Investment Outlook

In this space twelve months ago, our view was that rapidly rising global inflation and the resultant restrictive monetary policy would create challenging conditions for capital markets, and that a defensive position was called for. That position proved valuable, as a bias toward risk aversion avoided meaningful capital losses.

2022 Mid-Year Update

Coming into the year, our capital markets positioning was cautious given extreme valuations, rising inflation, and questionable prospects for continued growth. Our assumption was that an intense rise in prices for consumers — driven by a decade of accommodative monetary policy following the Global Financial Crisis extending through the COVID era — would need to be countered by a deliberate slowing of the economy through tightening economic conditions.

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A Note on Market Volatility

Some quick thoughts on recent market volatility and declining asset prices.