10 weeks to go to year end, and yet so much ground to cover before then. First, the issue of the US election is looking less uncertain, lowering market volatility as we approach November. Everyone is watching the Fed nervously, wondering whether Janet Yellen will raise interest rates before year end. Markets are expecting no increase between now and then, though the direction of US interest rates is all but certainly higher as we move into Q1 and Q2 in 2017.
Overall, equity markets remain expensive and bond yields remain low, putting pressure on investors on both fronts. Year-to-date, our portfolios have outperformed capital markets, with returns in the 3% to 5% range, depending on the fund allocations within given client asset mix. We remain committed to our defensive position, driven by market fundamentals which favour portfolio allocations with lower downside risk.
This means emphasizing balanced and fixed income funds holding quality government and corporate bond positions, with tactical mandates. Giving fund managers the ability to make strategic decision regarding what they are holding in their portfolio, allows them the flexibility to do what they do best: deliver solid, risk adjusted returns over time.