Asset Allocation Update
Second Quarter, 2016

The economy is slowing. After growing 1.4% in the fourth quarter, estimates are below 1% for first quarter. The global econ­omy is faring little better. The International Monetary Fund cut its 2016 global growth forecast to 3.2%. In January, this estimate stood at 3.4%. Why so slow? A steady erosion in productivity, anemic labor growth, and deleveraging all play a role. These facts, especially productivity and labor, are harder to influence through policy. Fiscal and monetary policy are simply incapable of addressing these remaining challenges head-on. The trinity of productivity, labor, and investment determine growth potential in the long run. Viewed in this light, we see better what is behind recent years’ more gradual returns. Available market returns are, over time, inextricably linked to the economy after all. The economy is more global, interconnected, and slower growing than in the past. This is having a direct impact on returns.

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