A bond ladder is one of the most effective tools fixed-income investors can utilize. Even during a rising rate environment, we believe bond ladders can mitigate downside equity risk & diversify portfolios through good and bad market cycles.
Economic growth persists, and corporate earnings seem on track for another strong quarter. Tax reform prospects are uncertain, but any progress may provide a tailwind for equity prices. At the same time, we believe Fed policy should support markets.
Chief Investment Officer, Eugene Yashin, provides perspectives on the economy, financial markets, and strategies for stock investors. Hurricane-related disruption could reduce economic growth in the near-term. The prospect of tax reform helps fuel a rally in equity markets. Bond yields can rise without hurting stock prices, in our opinion.
Healthy earnings growth suggests to us that there is still upside in U.S. equities. We are encouraged that markets have shown a surprising level of stability given geopolitical and economic risks. Our quantitative assessment shows stocks that blend growth and value characteristics (growth at a reasonable price, or GARP) are well positioned for the late phase of economic expansion.
In a time of accelerated global growth, we believe investors can benefit from foreign exposure. Valuations in Europe, Japan, and emerging markets (EM) all look cheap relative to the U.S.
Despite the US Federal Reserve (Fed) raising rates, we believe bonds may prove resilient.
We expect the risk of a pullback in equity markets to continue, but we also believe the odds of a new bear market are low – PIMCO estimates 10% or less chance on recession over the next 12 months.
The importance of having an asset allocation well suited for your objectives and risk tolerance, as well as being able to focus on the long term, cannot be overemphasized.