Times: They are a' Changing

Hi folks,


As we slog through the stock market of February-March, it appears quite clear that January ended a long and pleasant stock market run, earmarked by the absence of volatility - especially down volatility. I guess we were right when we cautioned that this seemingly unnatural, extended upward trajectory would not go on forever.


2017 will be remembered as the last year of diminished obstacles and headwinds, which normally provides the bumps along the way. Most analysts expect the balance of 2018 should favor equities over fixed income, yet the pace of earnings growth is expected to moderate somewhat. It is anticipated that we could see wage inflation appearing in the U.S. where there is a shortage of qualified workers to fill jobs. This lack of available workers is one of the U.S.’s biggest problems. Hopefully this will force the hand of both political parties to come up with a smart immigration policy that will meet the employment demands of our companies.


It should be noted that 2017’s recovery was global with many countries participating. In the Euro zone and Japan, core inflation is still subdued. The general consensus is there is little risk of runaway inflation.


In the U.S., Federal Reserve Chairman Powell seems quite comfortable in his new role and has forecasted four likely .25% rate hikes for the coming year. This could be a slight negative to investors.


Yet in the U.S., we should soon start feeling the effects of the tax cuts, which should provide spending support from companies and individuals.


This will be the first in a decade that investors will be fully invested during an anticipated period of rate increases that could last well into 2019. Earnings growth of companies will probably weigh in more importantly than PE multiple expansions. Regional strengths and weaknesses will be a very important factor.


The correct asset allocation with a dollop of flexibility will play an important role in delivering competitive returns to investors.


- David Hunter



Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is no guarantee of future results .