Equity – EM

When Patience is a Virtue Patience is a virtue when it leads to good judgement. Last week, this kind of patience was on full display as Federal Reserve Chairman, Jerome Powell, delivered a dovish outlook on monetary policy. The more hawkish message of last summer and early fall is now gone, and rightly so given trends in the data since then. Specifically, a sharp spike in market volatility last fall, and clear signs of slowing global growth, has led to this moment. Ongoing Chinese trade and Brexit negotiations also compelled the change in attitude. We are happy to see the…

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It is not very often that emerging market equities trade with valuations this low compared to the S&P 500.  Typically, emerging markets trade with a lower multiple than developed given greater risks.  Yet, there have been few times over the last twelve years when emerging markets were valued this low on a price-to-earnings ratio basis compared with the United States.  Lower relative valuations reflect a variety of concerns including commodity prices, credit quality, currency, and growth.  All of these are valid things to be concerned about and we’ve written about them before.  Still, we have seen emerging markets underperform their developed market counterparts for…

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Our macro outlook is for slow growth and stubbornly low inflation. The start of policy normalization following years of zero interest rate policy in the United States comes at a time of weakening global growth and mixed signals from the domestic economy. We continue to view the United States economy as best positioned to weather the overall weak global environment that resurfaced in 2015. In this report, we take a long-term view and address expectations for markets over the long run. Full Report Click Here  

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The United States appears to be generating better growth these days when compared to estimates of its potential.  The graph below shows how the United States’ output has risen by more than the potential growth estimated by the Congressional Budget Office.  For seven quarters in a row, the economy has produced a higher growth rate than potential, which is absorbing excess capacity.  As this happened, the unemployment rate fell to near 5% from 10% back in 2009.  The total number of hours worked has expanded by 10% over that period as more jobs were added than lost.  Capital investment has…

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