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Investment Strategy Overview (ISO)

U.S. Trust's outlook on the economy, the markets, investment trends, portfolio considerations and asset-class weightings.

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Year Ahead 2019: Powerful Waves of Change

There are Powerful Waves of Change occurring all around the world at the macroeconomic, geopolitical, corporate, demographic and investor psychology levels. The “waves” did not all arise at once, rather they have been building primarily since the Federal Reserve (Fed) began to normalize monetary policy and the U.S. economy broke free from the rest of  the world with the help of tax reform and deregulation. This added a boost to rising business and consumer confidence, supported a corporate profits boom led by healthy capital equipment and consumer spending trends, spurred job growth to levels in which there are more job openings than available people to fill them at present, and eventually led to the largest economy in the world, the U.S., growing consistently above trend. 

Headline and event risk is high in 2019, which is likely  to lead to muted returns in equities. But equities, including dividends, as well as cash are still expected   to outperform fixed income over the course of the  year.

Christopher Hyzy Chief Investment Officer

Midyear Outlook: The Journey from the "Unnatural" State

Investors are on a long journey from an “unnatural” market environment to a more normal one. There are concerns that steps taken to normalize financial conditions could lead to instability if they’re not managed properly. We believe the journey will continue for the rest of the year and beyond. 

Low-cost funding is not new but its reach, duration, and overall impact have been much greater than in the past. This is why we believe its stabilizing effects could become destabilizing if they persist too long. This normalization “journey” is uncharted territory for investors.

Christopher Hyzy Chief Investment Officer

The Bull Market Has Been Wounded but We Expect Strength Is Around the Corner

Since this bull market is almost 10 years old and “information noise” is at sky-high levels through various social/media platforms more than ever before—it is natural to expect rolling concerns at this stage. We think the concerns are healthy to keep in mind the further we travel through the cycle but it may be too premature, at this point, to suggest the cycle is ending and a recession is around the corner in 2018. Economic growth is still gathering momentum as are corporate profits.

In bull market environments, market bottoms traditionally take a few months to occur. We believe we are currently in that process.

Christopher Hyzy Chief Investment Officer, U.S. Trust

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