If you hope volatility will revert back to pre-February levels, think again, as politics continue to take the lion’s share of attention in most investors’ minds.
We agree that traffic lights are slowly starting to transition from green to yellow as the U.S. dollar is close to a 2018 high, the Fed Funds rates are increasing, and rising bond yields offer a poor alternative to stocks. Now that the tax-cut boon is behind us, we are also starting to hear some "peak earnings growth" chatter caused by higher wage inflation and increasing corporate costs.
However, we believe these factors are symptoms related to a late cyclical push, not a risk-off environment. Consequently, we think equities have good quarters ahead of them. The ride may be bumpier than what we were used to in recent years. But, for now, we still don’t see any reason to change our bias favouring risk assets.
** I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone, and may not reflect the views of National Bank Financial Group. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by the Research Department of National Bank Financial **