No doubt, the world’s markets spent the first half of 2016 on rocky ground. Investors have been confronted with the British vote to leave the European Union (“Brexit”), a “growth scare” in the U.S., the economic deceleration in China, and the introduction of negative interest rates in some markets. Nevertheless, the global economy is expected to remain on a path to growth — albeit very slow growth.
Looking ahead to the second half of 2016, market volatility is likely to remain elevated. What are the longer term implications of the Brexit vote? Can the resilient U.S. economy continue on its growth path? Will Chinese consumption remain healthy as the world’s second-largest economy continues to slow? Potential opportunity will likely arise for disciplined investors who can look past the near-term macroeconomic clouds toward individual companies with bright prospects.
U.S. Setting the Pace for the Global Economy
Strong employment and wage growth support consumer health as construction and housing gain momentum. But given that companies in many areas of the market are fully valued, selectivity is important.
Down, but Not Out
In light of the Brexit vote the path forward for Europe is uncertain. Select companies are rising above regional challenges.
Emerging Markets: More Volatility, More Value?
The near-term outlook for some developing markets has brightened thanks to a turnaround in commodities prices. However, China’s deceleration continues to pressure many regions and volatility is likely to remain elevated.
Dividends Take Center Stage
The expected pace of interest rate hikes is relatively slow, rekindling demand for quality dividend-oriented equities. Look for global companies that can sustain and increase their dividends in a slow-growth world.
Bonds Lower for Longer
With the Federal Reserve approaching future interest rate hikes with caution, and global growth slowing, the “lower for longer” scenario remains intact. Bonds continue to provide important diversification.
Attractive Yield Opportunities
Choppy waters for stock markets barely register as a ripple in munis. Revenue bonds may offer a particularly attractive source of income and capital preservation. Should munis be a bigger part of your portfolio?