William C. Slaughter, CFA®
Senior Portfolio Manager
The U.S. economy is in the late stages of an expansion, and speculative excesses are beginning to proliferate. Risk assets will probably perform well in 2018 but increasing caution and portfolio conservatism are warranted
Results reflect a benign environment for fixed-income assets with EM bond markets tracking the overall strong performance of risk assets.
Fixed-income markets deliver strong returns, ignoring continuing political and economic risk, in a complete unwinding of the “Trump trade.”
Given market reactions, Donald Trump’s victory could be one of the most consequential political events in modern American political history.
Volatility or retrenchment in credit markets in Q4 may provide an opportunity to tactically increase exposure ahead of year end.
Facing a long winter for traditional fixed income returns, the greatest risk for EM investing is to not invest in them at all.
In a reversal of the second half of 2015, driven by negative EM headlines, 2016 is off to a robust start.
The quarter was driven by growing speculation over sputtering Chinese growth, with troubling prospects for a quick or easy repair.