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Short-term tactical outlook

Market Outlook Sep 2018

A snapshot of current views on equity, fixed-income and alternative asset classes — updated monthly to help you tactically adjust for opportunities and risks.

Overall positions

Equities

Fixed income

Alternatives

Cash

Key Takeaways

  • Emerging markets are under pressure. Considering the Turkish lira crisis and trade tensions with China, we believe the situation will get worse before it gets better. Turkey represents less than 1% of the MSCI Emerging Markets Index, but over 70% of the index consists of Asian countries. This makes the dynamics with China significant.
  • We removed our overweight to commodities. Commodity performance is linked to the health of emerging markets, which are struggling. Also, higher oil supply in both the U.S. and abroad has knocked down energy prices.
  • The U.S. dollar is up 6% this year. We believe the forces driving U.S. dollar strength will remain intact for the time being. Historically, the U.S. dollar has had several run-ups of significantly greater length and magnitude than the current rally.

Within equities

 

Within fixed income

 

Within alternatives

 


Currency

 

Disclosures

Source: Columbia Threadneedle Investments, “The U.S. dollar is up 6% this year” measured by the U.S. Dollar Index (DXY) from 1/18-7/18. DXY is a measure of the value of the U.S. dollar relative to a majority of its most significant trading partners, “Turkey represents less than 1% of the MSCI Emerging Markets index, but over 70% of the index consists of Asian countries” measured by the MSCI Emerging Markets Index, and unmanaged market capitalization-weighted index, is compiled from a composite of securities markets of 26 emerging market countries, as of 8/18. It is not possible to invest directly in an index.

Alternative investments involve substantial risks and are more volatile than traditional investments, making them more suitable for investors with an above-average tolerance for risk. Foreign investments subject the fund to risks, including political, economic, market, social and others within a particular country, as well as to currency instabilities and less stringent financial and accounting standards generally applicable to U.S. issuers. There are risks associated with fixed-income investments, including credit risk, interest rate risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer term securities.

Diversification does not assure a profit or protect against loss.