A Path Forward | February 9, 2018

Markets tumbled an additional 5.16% last week; the real question is, where can the opportunities be found?

In our most recent growth cycle, we experienced strengthening global growth with anemic inflation. This fostered an environment of increased corporate spending and accelerating growth (an environment that proves to be very favorable to equity returns).

There is a real chance, looking forward, that we could experience rising inflation and decreasing corporate spending. This would mean continued expansion, but with few prospects of future growth. US equities may be finding themselves in a paradigm shift. Making a move from Growth to Value as equities rely more on strong fundamentals in a rising inflationary environment.

During the most recent ruckus, International equities and Emerging Market equities suffered the most drastic hits. Last week, the S&P 500 fell 5%, a move never achieved in the entirety of 2017. While this was a large move, it was nearly half the move experienced in China, Japan, and Emerging Markets as a whole. These areas still carry strong fundamentals and warrant investment. European equities, additionally, represent an opportunity as weak inflation and accelerating growth has grabbed hold in the region. Recent history has been lacking volatility, but that has changed now. Although volatility is likely not going away, we still see a path forward.


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