Some of the reflation trades that received a boost from the US election look to be merely taking a breather as investors square positions; however, the fundamental support for others—particularly the outperformance of US small-cap equities—is challenged.
This chart book presents representative long-only and hedge fund manager performance for fourth quarter 2016. The median US Small-Cap Value manager posted the highest median return for fourth quarter 2016 (10.7%) and the year (24.2%). The median Global ex US Bonds manager posted the lowest median return for fourth quarter 2016 (-6.9%), while the Global Growth Equity ex US median return was lowest for the year (-1.1%).
Investors navigating the marketplace in 2016 witnessed uneven advances in equity markets, record low yields in bond markets, and a recovery in commodity markets. This chart book reviews returns and other metrics for the calendar year.
Change is in the air and the prospect for a bit of sunshine to break through the overhang of slow growth and lower-for-longer yields is palpable. Of course, the sun doesn’t shine forever, and overall our views are little changed. The things we have been worried about for some time—high valuations for certain risk assets, record-low interest rates, slow economic growth—have not gone away. The surest call to make for 2017 is that higher growth expectations will be paired with the distinct possibility of negative outcomes, putting a premium on diversification and liquidity management.
In light of markets’ initial reaction to the victory of Donald Trump in the US presidential election, we wanted to remind clients of our approach to portfolio management by providing thoughts from our Chief Investment Strategist, Celia Dallas.
October’s publication summarizes three articles related to index investing and market crowding. The first argues index investing has led to a substantial increase in the co-movement of equity securities, the second suggests the rise in index investing has decreased investors’ ability to diversify portfolios, and the third highlights that investors should consider factor strategies, even if their source of return is well known.
This chart book presents representative long-only and hedge fund manager performance for third quarter 2016.
We see scant evidence that richening valuations doom popular alternative beta strategies to underperformance, or that they are the primary source of historical excess returns.
Though valuations for Eurozone equities remain attractive, waning earnings growth and the difficult macro picture keep us neutral for now, but continuing to watch closely as US valuations push ever higher.
This chart book presents representative marketable and hedge fund manager performance for second quarter 2016.