Third Quarter Update!

Dear Friends,

As the kids go back to school, the world finds itself on a bit of a playground see-saw between economic growth and interest rates. Global economic growth is at the highest level since 2011. Across the world, manufacturing, consumer sentiment and business capital spending are largely on the upswing. Overall global growth is expected to hit 3.9%. This economic tailwind has produced stellar corporate earnings growth of over 20% for 2018.

However, this heightened economic growth is pushing central banks around the world to tighten interest rates. Since the financial crisis of 2008, world banks have engaged in an ultra-low interest rate policy that has helped spur economic growth. The policy pivot to tightening interest rates (along with any trade skirmishes) could produce a headwind to the current favorable conditions.

We believe that ultimately economic growth and corporate earnings will prevail in 2018 as central banks appear to be operating quite conservatively in their tightening efforts. However, any accelerated move in interest rates or a full-blown trade war could disrupt the current cycle. The market results so far in 2018 seem to reflect this ongoing back and forth with some months being good and others not. Despite this, the overall market performance is positive with returns of about 3-5% so far this year. We expect this pattern to continue for the rest of the year which will likely keep returns for the year in the more moderate range of 6-8%.