1. 2018 Q2 Market & Economic Overview
Mario Nardone, CFA

2. Available on the
XYIS Knowledge Base

3. Positive Signals Reasons for Concern
U.S. has strong economic growth, strong labor market, inflation finally around levels targeted by Fed
Stocks often perform well when economic growth is solid and rates rise from low levels
Emerging markets are still in early stages of economic recovery
Higher interest rates are good for savers
Rising trade tension could have impact on global growth
Flattening U.S. yield curve as Fed raises short term rates; concerns about possible inversion
Currency volatility impacting global markets
Are we in later stages of economic cycle?
Geopolitical concerns

4. U.S. Historical Protectionism
U.S. tariffs have been falling since the 1930’s
Rising trade escalation today is likely a lose-lose with rising consumer prices and lower global economic growth economic growth

5. Tariffs Have an Impact on Large Cap U.S. Companies Today
What will be the long-term impact globally of the current tit-for-tat escalation of tariffs?
Source: Wall Street Journal, Thomson Reuters Datastream

6. Low Unemployment Signals U.S. Economy is Running on all Cylinders
The unemployment rate is near its lowest level since 2000

7. Inflation Expectations Moving Higher
But don’t confuse “higher” inflation with “high” inflation

8. Inflation Numbers Hit Fed Targets
Still well below historical average

9. Yield Curve
The yield curve flattens as the Fed continues to raise short-term rates
Source: Bloomberg

10. 10 Year – 2 Year Spreads Narrow to Post-Crisis Low
Source: Federal Reserve Bank of St Louis

11. Global Fixed Income
Source: Morningstar

12. Volatility is Back in 2018…and is Normal
2017 was the outlier when we didn’t see much of any downside volatility
Source: Factset, April 30, 2018

13. Investors Need to Stay Disciplined as Even “Good” Years Have “Bad” Periods

14. U.S. Equity by Size and Style
Source: Morningstar

15. International Developed, Emerging and Frontier Equity
Source: Morningstar

16. U.S. Equity Valuations Remain Reasonable, Non-US Valuations are Below Average

17. Benefits of Diversification
Source: Morningstar

18. Maintain Your Focus on What Really Matters
Financial planning is a process, not an endpoint
Concentrate on long-term goals and objectives
Focus on reaching goals, not on beating benchmarks
Maintain a disciplined approach, in good and bad markets
Invest broadly and globally; asset allocation is key
Reduce investment and tax costs where possible
Rebalance as necessary