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Macroeconomic Views and What We're Watching

Macroeconomic Views and What We're Watching

| November 22, 2016

Link to "Navigating the Markets"


  • We reiterate our expectation following the election that stocks may produce mid-single-digit returns for full-year 2016.
  • Our upgraded small cap view is driven by strong technical momentum and the potential benefits of President-elect Donald Trump’s economic policies. ƒ
  • Our upgraded TIPS view is driven by post-election increases in growth and inflation expectations, though interest rate sensitivity remains a headwind. ƒ
  • Uncertain U.S. trade policy is a risk for emerging markets, but more fiscal stimulus and valuations are supportive. ƒ
  • Our industrial metals upgrade reflects increased fiscal stimulus expected in the U.S. ƒ
  • Expected gradual Federal Reserve (Fed) rate hikes and slow economic growth are supportive of bonds in the near term, though rising interest rates may be headwind longer term as growth and inflation expectations rise. ƒ
  • For fixed income allocations, we emphasize a blend of high-quality intermediate bonds and a small allocation to less interest rate-sensitive sectors such as bank loans or high-yield bonds for suitable investors.
  • From a technical perspective, the S&P 500 price continues to operate above its 200-day simple moving average, increasing the likelihood the intermediate-to long-term bullish trend is sustained.