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

  • On the Record by Chief Investment Officer Tony Roth, where he shares his views on the resiliency of the financial markets amid political and social crises, including the resurgence of COVID-19 and waning vaccine effectiveness, China’s regulatory crackdown, and high U.S. inflation, among a host of other developments. He further explains that, despite these experiences, risk assets remain the best place for investors, in the team’s view.
  • In Focus with Head of Investment Strategy and Portfolio Construction Meghan Shue where she maintains that sitting on the sidelines is not the best investment approach—but how exactly should one deploy cash into the market? All in or gradually over time? She explores the potential success of each and makes her recommendation.
  • Investment positioning and real assets overview.

Can nothing deter this market in 2021? It seems not, at least thus far, for the MSCI ACWI global equities benchmark returned more than 16% through just the first eight months, surpassing all but the most optimistic expectations. While the year has experienced an exceptional variety of political and social crises by any measure, the financial markets have hardly stumbled. Serious troubles over just the past month have included resurgent COVID-19; early signs of waning vaccine effectiveness; a regulatory crackdown in China; the highest U.S. inflation in 30 years; a Federal Reserve signaling a cutback in support; the collapse of Afghanistan; wildfires in the West; and last, but most certainly not least, two successive hurricanes hit the Northeast and then New Orleans. Despite these events, risk assets have remained the best place for investors, in the team’s view.

We are not surprised by the fine performance the stock market has turned in. In our view, none of these developments threaten to arrest the monumental economic recovery, though as detailed below the Delta variant certainly has slowed the momentum and inflation concerns continue to grow. Due to the volume of news that ultimately bears little on the economy, it is vital that we stick to our process. We take a nine- to twelve-month view of how we expect the domestic and international economies to evolve, examine the current values of asset classes, and allocate accordingly. Provided that no game-changing variants follow on the back of Delta—and to date we see little evidence of such a development—we foresee the expansion regaining its mojo and the equity market continuing to present good risk-reward tradeoff of the major asset classes.  

Delta variant takes a toll on growth

The resurgence of new COVID cases has been swift and far reaching, pushing average daily cases in the U.S. from a nadir of roughly 12,000 in mid-June to 155,000 at the end of August. That is still below the 225,000 per day that prevailed through much of December 2020 to January 2021, but in some states (mostly in the less-vaccinated Southeast) new cases met or even exceeded previous peaks.

To be sure the Delta variant has slowed the global growth trajectory. Before the renewed spread, we had expected a U.S. surge in spending on services like travel, vacations, dining, and salons. That was to compensate for a decline in spending on physical goods such as patios, decks, computers, bicycles, treadmills, and appliances that understandably boomed last year. In the spring and early summer of 2021, our predicted rotation into services was proceeding swiftly but was curtailed by Delta, which slowed the tempo while not reigniting spending on goods. Additionally, the disappointing August jobs report showed the vulnerability of growth to renewed virus spread.

Please see important disclosures at the end of the article.

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