It is hard to believe that we are already halfway through 2017! It doesn’t seem that long ago that we were coming into the year with some tempered optimism for the year ahead. The first six months of this year have not lacked for action. Stock markets around the world have rallied, led by improving profit trends and higher valuations. Bonds have been surprisingly resilient. The one area of weakness has been commodities, led in particular by oil prices, which have come under pressure as U.S. production growth has outpaced expectations. All in all, despite the fact that equity valuations continue to climb higher, we are seeing encouraging economic trends across most of the developed and developing worlds.
Yet in the midst of this improving landscape, we continue to see tensions simmer across the world. Whether in North Korea, Russia or the Middle East, instability seems to persist without any end in sight. While Europe is working to sort out the United Kingdom’s exit from the EU, the rest of the world is left wondering if other dominoes will fall.
Perhaps this heightened geopolitical risk, which has been one of our long-term themes for quite some time now, is just the “New Normal.” Perhaps it is just the product of a longer-term rebalancing of global powers, from one global superpower in the US, to a collection of powerful actors. In any event, while our primary focus is on economic fundamentals, we can’t turn a blind eye to the political and regional dynamics at play. To that end, we thought we would share a recent research piece conducted by our Research Consultant, Asset Consulting Group. In this document they highlight some of their thinking surrounding the geopolitical environment and what it means for investment portfolios.
We hope you and your families are enjoying a wonderful summer and look forward to our meetings ahead!