A third of the way through the year and markets remain in the doldrums. Markets here in North America hover around break-even, while global markets are down overall. Economic growth rates have been revised down for 2016, and corporate earnings remain under pressure. On aggregate companies are making money -lots of it, but not enough to justify current market levels. The S&P 500 is trading at 19 times earnings, a lofty number which requires much more robust growth then even the most optimistic economist is predicting.
'Lower for longer' is the mantra which defines the foreseeable future. Lower interest rates and economic growth. Historically these two factors have been inversely correlated, but with aging demographics and unprecedented levels of debt, investors will have to reset their return expectations. Being cautiously optimistic, while being defensively positioned is prudent under these conditions and we are confident out client portfolios are exactly that.
More to come next week, slow and steady wins the race.