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Q4 2018

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Jul 2019 | Q2 Takeaways


Jun 2019 | Treasury Yield Curve


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Key Takeaways - Fourth Quarter 2018

By Ralph Goldsticker, CFA | 11 January 2019

Expectations of slower growth, tighter monetary policy and heightened political risks resulted in high volatility and stock market declines.

  • Stock markets declined around the globe, and Treasuries rallied.

  • VIX spiked, and remains elevated.

  • Future performance will depend on growth expectations stabilizing, and on political uncertainty being contained.

Policy and economic uncertainty persist around the globe.

  • Economic growth is decelerating in the US, and is weaker around the globe.

  • Changes in short-term interest rates in 2019 by the Fed are less certain, and will depend on the economy.

  • Trade conflicts, BREXIT and growth of populist politics continue to introduce uncertainty.

The direction of longer-term interest rates will depend on underlying economic conditions. 

  • Despite low unemployment and rising and wages, inflation remains under control. Government budget deficits remain a longer-term concern.

  • During the quarter, decelerating growth and rising political and policy risks caused risk-free rates to fall and credit spreads to widen.

  • Over the longer-term we continue to expect low but positive returns from bonds - roughly in line with their current yields. Any capital losses from rate increases will be offset by higher reinvestment rates.

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