Though the risk from rising rates is potentially higher in Australia than elsewhere given household debt levels and the state of the housing market, we judge the risks and outlook as balanced and advise investors to remain neutral on equities and risk.
The risks from rising rates are potentially higher in New Zealand than elsewhere given the overvaluation of equities and the housing market. We advise investors to underweight NZ equities, fixed income in general, and the NZ dollar.
This chart book presents representative long-only and hedge fund manager performance for fourth quarter 2017. The median US Growth Equity ex Small-Cap manager posted the highest median return for fourth quarter 2017, returning 6.8%. Emerging & Frontier Markets Equity managers posted the best returns for the one-year period ending December 31, 2017, with a median return of 36.8%. The median US Intermediate-Term Bonds manager posted the lowest median return for fourth quarter 2017 (0.0%), while the median Cash Management return was lowest for the one-year period ending December 31, 2017 (1.1%).
Equity markets dazzled investors in 2017, as an uptick in global economic activity helped lift expectations for corporate earnings growth across developed and emerging markets. The performance of equities and other asset classes are reviewed in this chart book.
December’s edition summarizes three articles related to value investing. The first adjusts a well-known valuation metric by inflation and real interest rates to enhance its near-term effectiveness; the second highlights that over 50% of value equities’ outperformance of growth can be attributed to macroeconomic factors; and the third argues that investors should shy away from simplistic value investment strategies, as they tend to identify companies with inflated accounting numbers and/or earnings forecasts.
In our 2018 outlook, we review the prospects for several asset classes—developed and emerging markets equities, credit, real assets, sovereign bonds, and currencies—and share the advice of our chief investment strategist.
This chart book presents representative long-only and hedge fund manager performance for third quarter 2017. The median Global ex US Small-Cap Equity manager posted the highest median return for both third quarter 2017 and the one-year period ending September 30, 2017, returning 8.6% and 23.6% for the respective periods. The median Cash Management manager posted the lowest median return for third quarter 2017 (0.3%), while the US REITs median return was lowest for the one-year period ending September 30, 2017 (0.4%).
Another outbreak of Eurozone distress is not our base case, but more risk-averse investors should understand their options.
Slowing buyback activity is a sure sign it’s getting late in the current market cycle, but we expect buybacks to continue fueling the market for now.
Not in our opinion. Recent market leadership by the so-called FAAMG stocks is not extraordinary relative to history, and their valuations and fundamentals, combined with this year’s relatively healthy market breadth, mean that they don’t necessarily present an outsized threat at this time.