Markets played offense
July 1—December 31, 2016
Offense outperforms in a pro-cyclical, inflationary market
- During the second half of 2016, economic growth turned positive and the dollar strengthened. Inflation expectations increased, and the yield curve steepened.
- Trump proposed Reaganomics-type policies, but with a different economic backdrop.
- Earnings growth and earnings expectations improved. Equities outperformed fixed income, and non-traditional fixed-income strategies outperformed the Bloomberg Barclays Agg.
- Within equities, value, small caps, and U.S. outperformed. Cyclical/financials sectors outperformed growth/defensive sectors.
Markets get defensive
January 1—June 30, 2017
Investors more cautious amid administration mishaps and legislative delays
- The Trump agenda stalled, and the dollar began to weaken. Inflation expectations declined, and the yield curve flattened.
- Equities continued to outperform fixed income. Growth/defensive sectors outperformed cyclicals/financials sectors. Growth, large-cap, and international stocks outperformed U.S. value and small caps.
- Earnings and growth expectations sustained momentum
- Leading Economic Indicators Index and yield curve not signaling recession, and there are no indications of economic recession over the next 12-18 months.