In the July/August issue of our monthly flagship publication, we feature:

  • On the Record by Chief Investment Officer Tony Roth, Don’t Climb a Wall of Worry.
  • In Focus provides a look at the flattening yield curve—what it’s telling us now and whether it is likely to be the usual precursor of recession. 
  • Investment positioning and asset class positioning updates.

There is rarely, if ever, a time when investors are not faced with a slew of concerns that keeps them up at night. Today is no exception, as there are countless issues weighing on investor sentiment. A recent survey aimed to quantify how these investor fears stack up and they largely echo what we are hearing from clients. Many of these concerns are interrelated, but in this issue we provide context for how we are thinking about the top three and what risks could become more pressing in the second half of the year.

Few issues have received more attention from the investment community so far this year than trade, and this is a risk we are taking very seriously. In fact, in our 2018 Capital Markets Forecast, we highlighted trade tensions as a key risk to our positive outlook for equity markets. So far, we expect the tax cuts and increased government spending enacted in late 2017/early 2018 to outweigh the potential drag on U.S. economic growth from tariffs. (Estimates vary, but the tariffs could shave a couple of tenths of a percent off of 2018 GDP growth, whereas fiscal stimulus is on track to add 0.5%–0.75% to our baseline estimate of 2.25% GDP growth for this year.) The real risk as it pertains to trade relates to the effects on confidence and business investment should trade skirmishes keep uncertainty elevated for a prolonged period of time. Increased capital expenditure growth was a key goal of the tax cuts and is central to our optimistic view for the economy. We are already beginning to hear corporate executives discussing the possibility of putting expansion plans on hold until they have a clearer sense of how their supply chains may be affected.

Please see important disclosures at the end of the article.

 

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