September 5, 2017

  • Equities finished flat in August following steep sell-offs over increasing escalations with North Korea and uncertainty over federal fiscal policies heading into the fall.  Emerging markets outperformed all other regions and have extended their lead this year.
  • Despite a supportive backdrop for further business expansion, investors have been flocking to the safety of yield and growth certainty as reflected by the outperformance of safe haven assets such as U.S. Treasuries, defensive/growth equities, and precious metals. 
  • Long duration fixed income outperformed all other sectors as the equity market weakness spilled over into the credit markets. 
  • The U.S. dollar continues to weaken which has helped the relative performance of ex-U.S. assets over the U.S.
  • Strong performance of precious metals also reflect the diminished risk appetite among investors and is a further indication of the end of the so-called Trump cyclical reflationary trade.
  • ‘Momentum’ style of investing continues to dominate all other factors as investors flock into large cap growth (technology and health care) while shunning the more cyclical sectors.  In addition, yield proxy sectors such as utilities and REITs performed well.
  • Despite being the costliest natural disaster in U.S. history, Harvey is not likely going to tip the U.S. into recession.  The expected impact to U.S. GDP is around 0.1-0.2%.  

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