http://www.sitfunds.com/wp-content/uploads/2013/12/rjs0421.jpg533800sitwordpresshttp://www.sitfunds.com/wp-content/uploads/2016/03/logo-top.pngsitwordpress2014-04-21 18:44:232017-01-17 12:20:18Roger Sit
Fears that recent trade actions will escalate into a trade war contributed to weakness in large capitalization equity indices during March, as the stocks of many multinationals came under pressure. In contrast, small capitalization and domestic-centric stocks generally produced positive returns for the month given solid upward momentum in the U.S. economy. Fixed income portfolios were slightly negative year to date due to rising interest rates, which negatively impact the price of fixed income securities. Business confidence has remained high post the 2016 presidential election as the Trump administration continues to execute a business-friendly agenda including tax reform and deregulation. Combined with better global GDP growth, these policies have contributed to a resurgence in domestic business activity and capital spending. Consequently, we project U.S. real GDP growth will accelerate to at least +2.7 percent in 2018 from +2.3 percent in 2017. However, the more hawkish tone of late on foreign relations and trade risks dampening “animal spirits.” In terms of monetary policy, the Federal Reserve recently raised the fed funds rate 25 basis points to a target range of +1.50 to +1.75 percent as it seeks to slowly “normalize” monetary policy. We generally expect two additional 25 basis point interest rate increases in calendar 2018, but believe policy decisions will largely remain data dependent. Given our belief that growth optimism will largely remain in place over the near- to intermediate-term, we have added to stocks that have been unjustly penalized by recent global trade fears. We have also added to beneficiaries of increased capex and rising interest rates and reduced positions in companies that lack meaningful pricing power in an inflationary backdrop.
For more details, including a longer discussion on President Trump and tariffs, please see the complete Sit Investment Associates’ April 2018 Global Investment Outlook and Strategy paper. Click here: Global Outlook and Strategy (Adobe Acrobat).
Scheduled in 2018
Join us at breakfast or lunch sessions of our 2018 investment seminars. See schedule.