July 28, 2017
Early in the quarter, the U.S. Federal Reserve initiated its third interest rate hike since late 2015.
The Bank of Canada seems to have found enough evidence to start the process of reducing accommodation, after seeing the best quarter for retail sales in almost seven years, more evidence of U.S. export growth and continued job gains.
Economic fundamentals continue to be supportive, with recession risks at very low levels, regardless of the historically long period of expansion.
We anticipate economies will be able to muddle through this modest growth environment, however it is financial markets that are more vulnerable to swings in liquidity from central banks.
The outlook will become more uncertain as the long-term headwinds of weak growth in the working-age population and record debt levels weigh more clearly on the economy.
The increased use of indexed strategies expands the opportunity for active managers to take advantage of discrepancies between the underlying valuation of businesses and market prices.