Economic Update

2nd Quarter Review - Outlook

For the most part, risk assets across the globe managed to post nice gains during the quarter, though concerns over less accommodative monetary policy stances from a few key central banks and weakness in technology stocks took a little wind out of the bulls' sails as the second quarter came to an end. Stock market volatility remained relatively low as we saw an improving earnings picture, a pickup in economic activity - particularly overseas, and lower long-term interest rates despite another rate hike by the U.S. Federal Reserve. Political uncertainty in Europe lessened during the period amid pro-European Union parties winning key elections but some pockets of political uncertainty remained, namely in the U.K. and the U.S. In the end, weakness in June could not keep stocks across the globe from turning in one of their better performances over the first half of a year since 2009.

Some of the key developments included:

• Steady U.S. and global economies with business and consumer sentiment still near recent highs.
• Greater potential for less accommodative monetary policy in Europe over the short term.
• Fed could begin unwinding its balance sheet this year while another rate hike is likely.
• Fading political uncertainty in Europe, but still somewhat elevated in the U.S.
• Valuations across asset classes remain elevated, but earnings growth continued to improve.

Politics will likely continue to be a focus for markets as we head into the latter part of the year even though Europe may be less of a worry for market participants following a few EU-friendly election results in recent months. U.S. policy uncertainty remains, however. Nevertheless, our indicators continue to suggest a low probability of a recession unfolding in the U.S. and abroad over the near term. With corporate earnings continuing to improve, we think the fundamental backdrop remains positive for risk assets. Elevated valuations across asset classes remain a concern for us and markets are pricing in a relatively low probability of the Fed raising rates again this year. Any disappointment on either front could drive volatility higher in the months ahead. We continue to favor stocks over bonds in our dynamic positioning and were maintaining our international tilt as the quarter came to an end. We also view corporate credit and small-cap stocks favorably.

To read more about our outlook, please click this link.

2nd Quarter 2017 Economic Update

Brett Lapierre, CFA, Investment Analyst

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These views represent the opinions of Kummer Financial Strategies Inc and represent a synopsis from the analyst’s reviews for the quarter cited herein. This is not intended as investment advice or to predict or depict performance of any investment. These views are subject to change after the date posted considering subsequent developments. Investing in fixed income securities involves credit and interest rate risk. When interest rates rise, bond prices generally fall and a Fund’s share price can fall.  Investing in foreign securities involves additional expenses and special risks including potential loss of principal.