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Foundation Investment Advisors and Consultants
 

Insights and Publications

Colonial Consulting provides insights and analysis on current conditions and challenges, market environment, and industry trends.

Global Market Summaries

  • In the first quarter, almost all major markets posted gains; the S&P 500, MSCI EAFE (USD), MSCI EM (USD), and Merrill Lynch High Yield Bond Index appreciated by 6.1%, 7.2%, 11.4%, and 2.7%, respectively. Global markets appeared to be buoyed by an unflappable sense of optimism with regard to future growth; persistent concerns such as the Brexit, political uncertainty, diverging monetary policy, and stagnant growth gave way as investors chose to focus on positive economic fundamentals. In Europe, positive inflation numbers across the region and news that job creation rose to its highest number in ten years indicated to some market participants that the region had turned a corner. China and Japan both saw positive economic data, indicating growth in their manufacturing sectors, while emerging markets benefited from growing exports. Domestically, economic data continued to be positive. However, the dramatic rise in positive sentiment seemed to be outsized relative to these steady improvements and tied to expectations for President Trump鈥檚 administration鈥檚 ability to create a pro-growth environment through a combination of tax and regulatory reforms. The National Federation of Independent Business鈥檚 Index of Small Business Optimism jumped to a record high following the election and has remained at near-record levels. According to recent survey results, actual earnings, capital expenditure plans, and job-creation plans all posted gains in March. However, in recent meetings the FOMC noted there is a discount between 鈥榟ard and soft鈥 data, as businesses鈥 positive forward-looking views have yet to effect a significant change in expenditures. Both policy makers and investors face a period of hard work ahead; policy makers have the difficult task of not squandering the favor the markets have afforded them, while investors face the difficult prospect of finding pockets of value in a market where many assets are priced to perfection.

  • After experiencing one of their worst Januarys in recent memory, US equity markets staged an impressive recovery that accelerated during the last few weeks of the year. Questions concerning a deceleration of growth, particularly in the emerging markets, gave way as the year progressed; economic data improved and 鈥渁nimal spirits鈥 appeared to rekindle as investors took a positive view of President-elect Trump鈥檚 campaign promises. The year proved to be a lesson in professional forecasters鈥 fallibility, with the Brexit vote and the US presidential election results catching many by surprise. The economic impact of these events yet unknown, the World Bank projects global GDP to accelerate in 2017 as emerging-market exporters benefit from improving prices for commodities and advanced economies benefit from fiscal stimulus. However, the bank鈥檚 report also mentions new risks that could hinder growth, including rising trade protectionism and uncertainty about policy direction in developed economies...

  • 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...

  • In the second quarter of 2016, equity markets and investors鈥 expectations were rocked by the results of the UK鈥檚 vote to exit the European Union. Prior to the Brexit, the markets seemingly scaled a wall, overcoming obstinate, lingering concerns about lackluster global growth. The IMF projects that global GDP will grow 2.4% this year 鈥 a positive number, but one which leaves some market participants uneasy given the extraordinary stimulus measures implemented in economies around the world. Following the vote, political risks seemed to take center stage. European market pundits quickly coined a whole new set of acronyms for the potential departures of other members of the European Union (Dexit, Frexit, Nexit, and Quitaly). While far less dramatic than the events in Europe, our own political process has introduced a fair amount of unpredictability; both the presidency and a large number of senate seats are up for election this fall, which raises the potential for future policy changes...