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2018 Clear Harbor Quarterly Market Outlook

CLEAR HARBOR OUTLOOK FOR 2019

After years of advances, global equity markets ended 2018 with the stinging reminder that they can still reverse on a moment’s notice. A year that began amidst historically low inflation, accelerating economic growth and expanding equity valuations ended with an eruption in volatility and the meaningful outperformance of broad fixed income benchmarks—precisely the reverse of what most strategists had predicted. 

Record-breaking swings in December promise to make this the worst year for the S&P 500 since 2008, with a decline of 5.2% through December 28th.[1] Despite a rally into the fall, global equity markets neared year-end off 9.6%; largely in response to the relative strength of the U.S. dollar, gold faltered by 1.9%. In contrast, the broad benchmark for U.S. bonds ended the year off just 0.2%.


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CLEAR HARBOR OUTLOOK: Q4 2018

As market participants peer toward year-end, they remain unsure of exactly how and when the concerns that have dominated 2018 will come to a head. Trade tensions between the U.S. and China, geopolitical risks ranging from North Korea to Iran to Great Britain, and a prevailing view that the longest economic recovery in our history must eventually end would all seem to weigh on investor optimism. Yet even as international markets struggle to find the traction they enjoyed last year, U.S. equity markets continue to defy prognostications from pundits.

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CLEAR HARBOR OUTLOOK: Q3 2018

Ah, July: another summer arrives bringing sun, temperate markets and rock-bottom volatility…

Not so fast.

We enter the third quarter of 2018 on the heels of significant geopolitical surprises. For the first time, a sitting U.S. president met with the dictator of North Korea, with open questions about the path ahead. Angela Merkel’s hold on power appears weakened in Germany, while Italy has seen the rapid ascendance of new parties to the levers of power. In the UK, the government has less than 10 months left to break an impasse in negotiations to govern its formal departure from the European Union.

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CLEAR HARBOR OUTLOOK: Q2 2018

I’m pleased to share our firm’s outlook for the second quarter.

Many of the macro trends we have highlighted in recent years seemed to move to the forefront of investors’ minds in recent weeks. The path toward monetary normalization after a decade of unprecedented and unconventional easing continued to frame investor considerations throughout the first quarter, even as geopolitical risks reclaimed their place atop the news flow on several occasions. The spotlight on technology shifted from long-running perceptions of invincibility to the sort of highly public missteps that invariably accompany disruption.

Such developments helped drive higher volatility and an abrupt correction in global equity markets from the highs of late January, along with incremental pressure on bonds. Oddly, emerging markets seemed more quiescent, with benchmarks outperforming most key global indices across both equities and fixed income by reasonable margins.

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