A Nation Divided

Last week’s midterm elections ended total Republican control in Washington , as the Democrats regained control of the House of Representatives. With some significant help from a skewed Senate map, in which Democrats and their allies had to defend 26 seats against the Republicans’  nine, Republicans held onto (and almost certainly increased) their majority in the Senate, pending the results of elections in Florida and Mississippi. This gave President Trump enough reason to claim victory in this election as he fended off a complete ‘Blue Wave .’

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Beyond the US Mid-Term Elections: Emerging Markets Look to Turn the Corner

Now that the US mid-term elections are behind us, it is a good time to reflect on the potential implications for an asset class that might not spring to mind: emerging markets equity. To appreciate the effect of the US elections on emerging markets, it is necessary to take a step back and review the issues affecting the asset class. On the back of surging earnings and global synchronized economic growth, emerging markets soared in 2017, with the MSCI Emerging Markets Index (USD) up 37%  in a market driven by growth and momentum.

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October Monthly Recap

The domestic equity markets fell sharply in October amidst high volatility, with big swings day to day, and in some cases, intraday. After leading the way up over the last six months, the growth indices led the way down in the reversal, driven by steep losses in the largest technology names, such as Amazon and Netflix, both down roughly 20%. The pullback in the month appears to be a reassessment of risk and some of the lofty valuations reached by these technology companies.

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Value, Soon To Be In Vogue?

Investors continuously look for an edge, seeking to maximize returns relative to risks. Favored strategies change cyclically, or trend during certain market environments, but one has always been in style: value investing. Value investors attempt to find underpriced stocks relative to fundamentals, and often examine valuation ratios or use a discounted cash flow model to uncover them.

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Is Winter Coming for the Bull Market?

October has stayed true to the historical trend of being the most volatile month for stocks, with choppiness creeping in, the equity market tanking, and the S&P 500 Index dropping by more than 3% last Wednesday, October 10. The sudden spike in the longer end of the curve beginning mid-September is one of the reasons cited for this huge sell off. The yield on the 10-year Treasury Note recently soared to a high of 3.23%, a level not reached since July 2011.

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August Monthly Recap

The domestic equity market continued to roll right along in August, driven by the Information Technology, Health Care, and Consumer Discretionary sectors. Given the much higher representation of these sectors in the growth indices, it is no surprise that growth outperformed value across the market cap spectrum. The Energy sector was the worst performer for the month, driven by the falling price of oil from its early August highs. This is the fourth consecutive month of positive returns for the large cap indices and the sixth consecutive month for the small cap indices.

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Are Emerging Markets Signaling Contagion?

Emerging markets stocks have declined significantly thus far in 2018, after a solid rally last year that led to the asset class’s best return since 2009. After reaching highs in late January, the space has slumped nearly 20%, stoking fears of further downside and potential contagion. The sharp pullback has caused many investors to question their commitment to emerging markets. Should they be worried, or is this pullback to be expected, given the historical volatility of the asset class?

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Have Domestic Equities been De-FAANG’d?

Oh how the mighty have fallen…or have they? FAANG, an acronym that represents five of the most popularly traded Information Technology stocks, including Facebook, Apple, Amazon, Netflix, and Google (whose parent company is Alphabet), generally sets the tone of the domestic equity markets. Looking at attribution for large cap growth managers, over and underweights to these stocks in many cases have influenced the returns of their investment portfolios relative to their peers and benchmarks.

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July Monthly Recap

Domestic equity markets posted strong returns in the month of July, with most of the price appreciation coming in the first two weeks of trading. During the month, markets reached highs not seen since the end of January on news of strong economic data. The unemployment rate declined to 3.9%, the second lowest rate in the last 48 years, and second-quarter US Gross Domestic Product (GDP) grew 4.1%, the highest rate in almost four years.

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Domestic Fixed Income: Where to Now?

Beginning in the second half of 2010, asset managers and economists began forecasting the Federal Reserve’s (the Fed) first postfinancial crisis rate hikes, and higher rates across the curve by the middle of 2011. It would be more than five years before the Fed’s first actual rate hike at the end of 2015, but for most of that period, the belief that higher rates were just around the corner convinced most asset managers to position their portfolios with shorter average maturities to minimize potential losses the higher rates would inflict.

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