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“While there are hopes of a soft landing in the global economy and a potential easing of geopolitical tensions, we are not yet ready to call the end of volatility and continue to take a cautiously optimistic approach.”

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One month does not a trend make: On Football and Investments

By: Jason Blackwell, CFA, CAIA®, Chief Investment Strategist; Brian Katz, CFA, Chief Investment Officer; Richard Steinberg, CFA, Chief Market Strategist

A review of October’s investment returns may cause you to believe that all of our worries went away – except that they didn’t. The so-called “Phase One” of a US-China trade deal seems to be advancing but hasn’t been signed. Brexit was delayed but is still pending final resolution. The yield curve is now mostly reverted but remains shallow. It is analogous to the plight of a Miami Dolphins fan, whose team won for the first time after losing their first seven games, hoping that their losing streak might reverse.

That said, it was a good month in the markets across every major asset class. The S&P 500 was up a respectable 2.2% and, for the second month in a row, international equities outperformed their U.S. counterparts. Moreover, emerging markets rallied strongly. Fixed income returns were muted but positive as credit spreads narrowed and the direction of interest rates became clearer. You may recall that October began with one of the worst starts to the month on record, but that seems a distant memory.

The Federal Reserve (Fed) lowered the Fed Funds target rate by an additional 25 basis points to a range of 1.5% -1.75% on October 30th, its third cut since July. Many expect this to be the last rate cut of the year as Powell explained that the Fed “sees the current stance of monetary policy as likely to remain appropriate.” Growing evidence suggests that both the U.S. and global economies may be heading towards a soft landing limiting the need for additional stimulus. The Fed also outlined and implemented its plans to provide additional stability to overnight lending markets, which have experienced volatility over the last couple months, pushing rates above the Fed’s targets. The issue was technical (rather than fundamental) and we believe that the Fed’s interventions are sufficient to keep capital markets flowing.

It is tempting to overlook concerns from the previous two months after markets posted solid returns in October, not unlike the way a Dolphins fan might get overly excited.  Indeed, the bullish observer finds support in a 10-year market run that has generally shown little reason for worry and substantial increases in indexes. While there are hopes of a soft landing in the global economy and a potential easing of geopolitical tensions, we are not yet ready to call the end of volatility and continue to take a cautiously optimistic approach.

Brian W. Katz, CFA, President of Colony Investment Management & Chief Investment Officer

Brian is the President of Colony Investment Management, Chief Investment Officer, and a Principal of the Colony Group. Since 1997, he has been instrumental in creating and refining The Colony Group’s investment discipline, including designing and maintaining investment strategies that meet the diverse needs of our clients. He manages a select group of the firm’s investment portfolios, is active in equity research, and directs the firm’s managed mutual fund portfolio strategies.

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Jason Blackwell, CFA, CAIA®, Chief Investment Strategist

As the Chief Investment Strategist of The Colony Group, Jason is an investment professional possessing both deep analytical experience and a passion to improve the decisions and outcomes of clients by simplifying the often-complex world of investing. In his role, he is an important resource for our clients and wealth advisors, assisting them in developing portfolios designed to support their goals and communicating the firm’s investment strategy. He also serves as a vice-chairman of the Colony Investment Committee and a spokesperson for Colony Investment Management.

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Richard D. Steinberg, CFA, Chief Market Strategist & Co-Chair, Colony Group Investment Division

Richard Steinberg is the Chief Market Strategist, Co-Chair of the Investment Division and a Principal of The Colony Group. He brings over 25 years of experience leading seasoned investment teams and developing customized investment strategies for private clients, corporations, foundations, retirement accounts, profit-sharing plans and pension accounts. He also analyzes and explains the markets as well as the ever-changing economic and political landscape for clients and the media.

Richard brings a passion for financial management excellence that is personal, cordial, and customized to his roles serving on Colony’s Executive Team and Investment Committee. His philosophy is simple: be available, be flexible, be dedicated and strive to be the best.

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