2017 Clear Harbor Quarterly Market Outlook
CLEAR HARBOR OUTLOOK: Q4 2017
September 30, 2017
While recent months have seemed defined by hurricanes, wildfires and North Korean saber-rattling, financial markets have proved remarkably resilient. Indeed, even as the world witnessed the destruction in Texas, Florida and across the Caribbean, several key asset classes continued their upward trend.
The markets’ march higher is not without reason. Earnings continue to improve across an impressive complement of major markets, including the U.S., Europe, Japan and emerging markets. The broader economic environment remains one of subdued inflation readings, elevated business and consumer sentiment, improved employment data, expanded global manufacturing, and increased retail sales. At the same time, low volatility in equity markets has coaxed incrementally more positive capital flows from investors, further bolstering price-to-earnings multiples and year-to-date returns.
While we certainly prefer stronger results to sagging ones and economic sunshine to hurricanes, investing—like storm preparation—requires continuous monitoring and planning to anticipate possible shifts. In fact, periods of good weather are precisely the time to assess the prospects of significant storms on the investment horizon, and to prepare accordingly.
CLEAR HARBOR OUTLOOK: Q3 2017
June 25, 2017
While the front pages remain filled with political drama both here and abroad, the business pages so far this year have come to describe a kind of “Goldilocks” equilibrium in which economic growth, inflation, and the state of corporate credit are all neither too hot nor too cold. Although growth has been considerably less robust than in some past expansions, economic data has proved stubbornly balanced enough to paint a supportive backdrop for both equity and fixed income markets.
In the U.S., the S&P 500 has gained 9.9% year-to-date, while internationally, the MSCI All-World Index has gained 12.2%. The MSCI Emerging Markets Index has risen by 18.4%, with countries such as India benefiting from investor perceptions of a robust demographic profile, as well as ongoing structural reforms to address half a century of inefficient capital allocation and unlock greater productivity.
CLEAR HARBOR OUTLOOK: Q2 2017
March 30, 2017
The year started with equities continuing the steep advance that marked the final weeks of 2016. U.S. equities gained between 2.0% and 6.1%, international developed markets averaged 8.8% and emerging market equities rose 13.3% — all well in excess of historic first-quarter average returns. The primary U.S. fixed income benchmark returned 0.73% as credit spreads remained firm, and sovereign yields trended higher in the U.S. and across a broad swath of developed and emerging markets—all encouraging signs of economic momentum.
Clear Harbor 2017 Outlook
December 23, 2016
As we peered ahead one year ago, our general view was that:
- earnings would underperform relative to Bloomberg consensus analyst estimates;
- the Federal Reserve would remain more dovish than even its own board anticipated, ultimately delivering just one rate hike (rather than the three they had predicted);
- global growth would prove lackluster; and
- structural impediments to growth would continue to weigh on investor sentiment, consumer confidence and returns across major asset classes.
While these core views were validated, the presidential election in the U.S. forced a marked shift in investor sentiment, sending equity prices significantly higher into year-end. To put this in context, the S&P 500 gained 6.6% in the 11 months leading up to Election Day—then rallied another 6% in the weeks following Donald Trump’s surprise victory.