Thursday, July 20, 2017

2017 Q2 Market Update from CUNA Mutual Fiduciary Consultants

Managing Principal for CUNA Mutual Fiduciary Consultants Scott Knapp recently reviewed how the markets reacted to recent trends in the global economy. These market trends included:
·    Outperformance of international stocks
·      Shifts in investor sentiment

As a result, Knapp noted how diversification strategies paid off during the quarter.

Outperformance of international stocks
The table below highlights the outperformance of international stocks. This outperformance primarily was due to softening of the US dollar and economic recovery in developed international countries.


Shifts in investor sentiment
Shifts in sentiment also had a significant effect on markets, even though it may not be immediately apparent. Late last year and early this year, global financial markets had optimistic expectations for economic growth since last year’s U.S. presidential election. By the second quarter, those expectations have been tempered by political disruption out of Washington and mixed economic reports.

Nonetheless, interest rates actually fell during part of the quarter even though it was clear that the Fed would extend its current rate-hiking cycle. This gave investment grade bonds a small lift. Therefore, the shifts in sentiment that caused big changes within the indexes were nearly invisible on the surface.

Diversification pays off
The market trends benefited diversification strategies. Investors who maintained their exposure to international stocks in spite of their underperformance—as well as to growth and value stocks—finally benefitted.

Looking ahead, shifts in market leadership are anticipated as political circumstances become clearer and as the Fed begins its rate-hiking cycle. Investors should be prepared for a return of volatility in the future.

Market Update Summary
·      The outperformance of international stocks was due to softening of the US dollar and economic recovery in developed international countries.
·      Shifts in investor sentiment also had a significant effect on markets, even though it may not be immediately apparent on the surface.
·      Diversification strategies paid off for investors who maintained their exposure to international stocks in spite of their historic underperformance—as well as to growth and value stocks.
·      Investors are advised to be prepared for a return of volatility in the future.

About the Presenter
Scott Knapp is Managing Principal – Investment Consulting for CUNA Mutual Fiduciary Consultants. He’s responsible for CUNA Mutual’s overall investment philosophy and implementation of programs that help institutional investors meet their objectives. He’s also a lecturer at the University of Wisconsin-Madison.

DISCLOSURE:
CUNA Mutual Fiduciary Consultants is a marketing name and service of MEMBERS Capital Advisors, Inc., 5910 Mineral Point Road, Madison, WI 53705, the registered investment advisor affiliate of CUNA Mutual Group. MEMBERS Capital Advisors has assets under management of more than $15.2 billion*, including the general account of CMFG Life Insurance Company.

Visit www.cunamutual.com/CMFC for more information.

*As of June 30, 2016. 401K-1848817.1-0717-0819
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