Many of the events that shaped last year will be front and center once again in 2017. If predicting of almost everything proved futile in the past year, let’s hope some measure of normalcy returns to a world that becomes more fractured and complicated with each new headline. Tensions brought about by the rise in world populism will test the resolve of all elected leaders, in particular newly anointed Theresa May and Mr. Trump. Three thousand people ascend on Davos this week to hear the pundits and world leaders make their pronouncements on everything political and economic. Most of the speeches will be scripted and the most newsworthy events may be what happens during the after work parties.
Growth in the US seems geared to more, but not robust growth. Infrastructure spending, deregulation and tax reform are potential drivers. Monetary policy, trade policy, dollar strength and inflation represent the risks. This contrasts the global environment where inflation remains subdued and monetary policy accommodative. Valuations in both equity and bond markets are high and suggest lower returns going forward. Better opportunities exist in some of the foreign markets, but this has been true for an extended period. US credit looks better than government bonds and EM debt better than European sovereigns. The risks here are dollar strength and Chinese currency policy.
Salt Creek is fast approaching its first birthday. At the end of this month we’ll do the quarterly rebalance to realign the portfolios to the policy allocations. New technology enhancements are being put in place quickly and more are on the way. Performance reporting has been a much needed tool and as promised we should have a solution available to our clients very soon. Thank you for your interest and stay tuned for more additions to our platform.