Market Overview

Recap

Interest rates fell significantly during the month of August as heightened uncertainty pertaining to both a U.S/China trade deal and weaker economic activity globally caused growth expectations to drop; Citing the growing number of risks that are threatening global growth, the Federal reserve cut the Fed Funds rate twice, 50 bps combined, during the 3rd quarter; During the 3rd qtr., U.S large-cap equities outperformed their small-cap and mid-cap peers by 1.90% and 1.79%, respectively; In addition, value stocks significantly outperformed growth stocks for the quarter; Despite the outperformance of more conservative asset classes during the quarter, corporate credit was the strongest performance segment of the Bloomberg Aggregate Bond Index; U.S. manufacturing data has continued to worsen throughout the 3rd qtr., with the U.S. ISM Manufacturing PMI posting its worst reading since late 2009.

Outlook

According to our analysis the Federal Reserve will continue to ease policy by lowering the Fed Funds rate by an additional 25 bps by year-end; We do believe that there is a reasonable probability of both U.S. consumer and manufacturing data may continue to worsen in the coming quarter; In addition, despite the progress that has been made on trade negotiations with China, we expect volatility to continue and believe it is prudent to maintain a neutral benchmark allocation between equities and fixed income; In expectation of the potential risks, we have brought the durations of our fixed income portfolios inline with their respective benchmarks, and have continued to selectively decrease credit exposure; Even though growth stocks have outperformed value stocks this month, we see this recent trend breaking down and believe a more diversified equity portfolio with a tilt toward more conservative sectors;

 

Economic Data

 

Economic Data

Growth vs. Value Style Reversal

 

Growth vs. Value Style Reversal

Strong Dollar

Strong Dollar - CIM investments

Slowing Earnings?

Follow the leader

Manufacturing Contraction

 

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