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:
· 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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