Greetings from all of us at Colony Family Offices. We hope you are enjoying the season.
Given the significant sell-off in equities and other risk assets over the last several weeks (despite yesterday’s strong gains), we are sharing our perspective. Here’s the summary:
- There’s been no shortage of negative news flow regarding the ongoing trade dispute with China, a lack of progress on the Brexit deal, and now the partial US government shutdown. Market sentiment has clearly turned more negative, reflecting increased uncertainty around the policy outlook and slowing economic growth.
- In our view, the US and global economy remain in decent shape, though the pace of growth may have peaked for this cycle. To be sure, 2017’s highly synchronized growth has decelerated and become more uneven.
- Ultimately, we think that the backdrop of positive (albeit slower) economic growth and tame inflation should provide support to corporate profits and equity valuations over the intermediate term. Yet, volatility is likely to remain elevated as central banks seek to normalize monetary policy and the US transitions to the later stages of the economic cycle.
- Volatility can create attractive investment opportunities, which we’ll continue to evaluate. For example, we are considering a slight increase in our tactical allocation to energy MLPs given recent price weakness and asset class fundamentals. However, at this point, we recommend staying the course with current portfolio positioning—a slight overweight to cash/short-term fixed income and a slight underweight position in US equities with an emphasis on large-cap, high-quality stocks.
We hope that you find this information helpful. Please don’t hesitate to contact us if you have questions or would like to discuss further.