Monday, November 5, 2018

Investment Perspectives: Phase Transition, Credit Cycle, and the Great Reset

This month's Investment Perspectives discusses shifting investor sentiment, credit cycle in the yellow zone, and the October market reset.

You can read the full Investment Perspectives

In this month's issue:

“Phase Transition" Mark Luschini
We do not view this recent equity downdraft as a signal to trim risk assets (beyond which we advocated midyear, which was to lower overweight equity settings to align with policy targets). Given our belief that the economy is robust, the monetary cycle is still accommodative, and corporate profits will continue to grow, it is too early to turn cautious. However, the risks are plentiful, so close attention must be given to handicapping their development.

“Importance of the Credit Cycle” Guy LeBas
Whether the U.S. economy still operates in the traditional boom/bust cycles is a topic open for debate. Whether the U.S. economy and financial system still operate in boom/bust credit cycles is not.

“The Great Reset" Greg Drahuschak
Although it often is undeserved, October fulfilled its reputation as a bad month for stocks but not as bad as it could have been. Midway through the last week of the month, the S&P 500 was on track to produce its fourth worst October result since 1949. A strong rally in the final two days was enough to have the S&P 500 end as the fifth worst October.