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Third Quarter 2016 - "Unresolved"

In the third quarter, risky assets rallied across the globe; almost all major markets posted gains. Year to date, the S&P 500 has risen over 7.8%, the MSCI EAFE (USD) Index is up 1.7%, the MSCI EM(USD) Index is up 16%, and the Merrill Lynch High Yield Bond Index has appreciated 15.3%. Positive economic data, particularly in the US and China, a reprieve from new macroeconomic challenges, and broad investor expectations that ultra-low interest rates are in place for the foreseeable future allowed for more risk taking. Investors seemingly accepted a holiday and have looked past the unresolved impact of the Brexit, the potential outcome of the US presidential election, and central banks鈥 unpresented level of quantitative easing. Relative to the start of the year, expectations for higher US interest rates have declined dramatically; this can be seen most profoundly in the downward shift of the Treasury yield curve 鈥 both ten-year and 30-year treasuries ended the quarter at yields nearly 70 bps below where they were last December...

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GMS 2016Q3 Duplex.pdf1.17 MB