2017 Q3 Investment Report Commentary
A Winning Hand
This year’s story has been the strength of global stock markets. Equities have moved higher based on better than expected fundamentals including synchronized growth across most economies. Other factors—such as central banks, North Korea, hurricanes, and politics—have not been enough to disrupt an economic environment that could easily be characterized as “good but not great.” The strength of equities outside the U.S. is not surprising given the more attractive valuations in foreign markets. Other themes this year include the strength of high yield bonds, non-U.S. REITs, and gold.
Recent Portfolio Positioning Shifts
We deem U.S. equities increasingly expensive along with related asset classes (e.g., high yield bonds). As a result, we have made incremental shifts away from those investments.
Daintree portfolios are tactically underweight U.S. equities and overweight non-U.S. equities. With profits captured through high yield and REIT sales, we are adding to inflation protection– overweighting Treasury Inflation Protected Securities (TIPS), infrastructure MLPs, and short-term bonds. We believe these areas are attractively priced due to the perception that interest rates and inflation are going to be low forever. Of course, we do not know precisely what will happen in the near-term, but experience gives us confidence in buying now while valuations are attractive.
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