The following is Sit Investment Associates' quarterly global outlook and strategy summary. This summary contains the collective opinions of our analysts and portfolio managers and is provided for informational purposes only. At the end of each calendar quarter, the full publication is available. While the information is accurate at the time of writing, such information is subject to change at any time without notice, and therefore, so may the investment decisions of Sit Investment Associates.

Global Outlook and Strategy

September 11, 2017

Ongoing strength in larger capitalization, growth-oriented stocks in the technology and healthcare sectors led U.S. equity performance again in August. Gains in global equities remain underpinned by synchronized global growth, improving corporate earnings, easy financial conditions, benign inflation, and robust consumer/business confidence.  Due to buoyant global macroeconomic conditions, U.S. stock markets have remained surprisingly resilient in the face of elevated geopolitical tensions and partisan conflict in Washington. Looking forward, hurricane-related losses are unlikely to have a meaningful impact on the current trajectory of U.S. economic growth, but could provide a near-term boost to a number of industries including homebuilders, building materials, equipment rental, and autos.  The U.S. Bureau of Economic Analysis recently revised upward its real GDP growth estimate for the second quarter of 2017 to +3.0 percent from +2.6 percent and we continue to forecast that the U.S. economy will grow at an annualized rate of at least +2.5 percent in the third and fourth quarters of 2017. Given relatively benign inflation, we anticipate that the Fed will remain highly data dependent/market sensitive as it seeks to "normalize" the fed funds rate and its balance sheet concurrently – this will likely be a methodical, multi-year process. Given the prospect for increased equity market volatility, lower correlations, and other late-cycle dynamics, the environment for the relative outperformance of both growth and active strategies is improving. Due to the wider range of economic/policy outcomes post the U.S presidential election, we continue to implement a diversified, "barbell" strategy that consists of a combination of traditional/conservative growth sectors and Trump policy beneficiaries.

For more details, including a longer discussion on the recent low volatility of financial markets, please see Sit Investment Associates' July 2017 Global Investment Outlook and Strategy paper. Click here: Global Outlook and Strategy (Adobe Acrobat) or e-mail us at: siainfo@sitinvest.com.

 

September 23, 2017




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