Mid Quarter Commentary - November 2019

With the S&P 500 trading at an all - time high and returning over 4% quarter-to-date, risk assets have performed remarkably well.  Much of this positive performance can be attributed to the progress being made on the trade front.  With the hope of a "phase one" trade deal being signed with China before year-end, investors' outlooks have gradually become more optimistic toward global growth over the medium term.  In addition, further easing by the Federal Reserve has also been supportive of risk assets. The Federal Reserve cut the Fed Funds rate by an additional 25 bps during their October 30th meeting, bringing the aggregate amount of interest rate cuts to 75 bps since the beginning of 2019.  Interest rates across the yield curve have been generally decreasing year-to-date, however; since the beginning of the fourth quarter interest rates have begun to rise as the overall growth outlook for both the U.S. and abroad has improved.  

Following this recent run-up in interest rates, the durations our portfolios are close to being neutral relative to the benchmark.  We see the likelihood of a continued sell-off in bonds to be low, as it would require significantly stronger economic data as well as a reversal of the Fed's current stance.  We also believe that given the recent performance of equities and their full valuations, a neutral asset allocation relative to the benchmark is most appropriate.

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