In the June issue of our monthly flagship publication, we feature:

  • On the Record by Chief Investment Officer Tony Roth, 2018 Halftime Report: Charting progress on our Capital Markets Forecast.
  • In Focus provides a look at emerging markets, whose economies and asset performance projections are closer to home than you may think.
  • Investment positioning and asset class positioning updates.

As we approach the year’s halfway mark, we find it a fitting time to check in on what has transpired in financial markets, particularly as it pertains to the expectations we set back in December when we released our 2018 Capital Markets Forecast, Global Positioning Systems: Recalculating in Light of Detours, Bumps, and Blind Spots. In it we took a look at the signposts being presented to us as we continue to navigate financial markets nine years into the current bull market. Here, we check in on our proverbial GPS to assess where we remain on course, and where we have perhaps changed routes in order to stay on the best path for our clients’ portfolios.

Our first theme stipulated that the U.S. economy was in the mid-to-late stage of the economic cycle but structurally low inflation would allow the Federal Reserve to tighten policy gradually, extending the cycle for at least another year or two. Despite inflationary developments in the first quarter, we see this theme as very much on track.

As anticipated, inflation has moved up this year, due to rising price pressures across a variety of goods and services and also “base effects,” as lower inflation readings from early 2017 roll out of the year-over-year calculation. Importantly, we expect inflation to increase into the middle of this year but to level off at comfortable levels. Structural forces tempering long-term inflation—aging demographics, interconnected global supply chains that transmit low inflation across borders, and technology (i.e., the “Amazon effect”)—are still quite relevant in dampening long-term price pressures.

Please see important disclosures at the end of the article.

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