Investment Insights Podcast: Does Brexit still mean Brexit? The UK election result and what it means for the markets.

Holland_Podcast_150x126Tim Holland, CFA, Senior Vice President, Global Investment Strategist

On this week’s podcast (recorded June 16, 2017), Tim addresses the political dynamic in the UK and the impact the recent election – and its rather surprising outcome – might have on Brexit and global markets.

Quick hits:

  • On June 8, U.K. voters went to the polls and confounded the experts and the pollsters by moving away from the ruling Conservative Party and embracing the Labour Party.
  • Despite all of the political drama, we still see Brexit moving forward and the U.K. exiting the European Union.
  • Near term, we also see the unexpected and unsettling U.K. election results potentially aiding pro EU, pro establishment political parties across Europe.
  • In the U.S., we don’t envision any meaningful economic or market impact from the political upheaval in the U.K.

For Tim’s full insights, click here to listen to the audio recording.

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The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Fun Facts on The Election & The Stock Market…and Why None of Them Matter

Crosby_2015Dr. Daniel Crosby, Executive Director, The Center for Outcomes & Founder, Nocturne Capital

With less than one month remaining until the election, the already frenzied political coverage is sure to become even more fevered in the coming days. While each presidential election is unpredictable, it seems certain that this one is destined for the history books. For all of their sophistication, are there any political pundits that correctly predicted the rise of Bernie Sanders or that Donald Trump would emerge from a pack of 16 more politically experienced Republicans?

Adding to the confusion is that recent popular votes of all stripes—from Brexit to the Colombian peace deal—have not gone the way pollsters predicted. In the face of all of this uncertainty it is natural to wonder, “could the U.S. be the next surprise?” And a natural follow-on question is, “What does all of this mean for my money?” To begin to answer these questions, let’s look at some historical trends around U.S. elections and the stock market.

Incumbent vs. Challenger

Most considerations of political impact examine how potential candidates might influence the market, but let’s begin our study by flipping that on its head and ask, “How might the market help determine who wins the election?” As you might expect, incumbent parties are helped enormously by a rising market and challengers tend to be swept into power by a poor market.

washington_wallstreetSince 1928, 14 of the 22 presidential elections saw a rise in the broad market in the three months leading up to the big vote. In all but two of those instances, the incumbent party stayed in their comfy digs on Pennsylvania Avenue. But what of the eight instances where the market was down in the run up to the election? All but one of those more bearish periods saw the incumbent ousted from power.

This phenomenon was seen most recently in the failed reelection campaigns of George H.W. Bush (1992) and Jimmy Carter (1980). Bill Clinton, sensing the natural tendency of hard economic times to bring about change chided the senior Bush with his now famous “It’s the economy, stupid” line. The date to watch for this particular metric in this election cycle is August 1, at which time the S&P 500 closed at 2,170.84.

Democrats versus Republicans

Inasmuch as Republicans are broadly perceived as the more pro-business of the two parties, it may come as a surprise that the stock market has performed considerably better under Democratic than Republican presidents. In fact, since 1945 the average annual gain under a Democratic president is 9.7%, easily besting the average gain of 6.7% on the Republican’s watch.

But a closer look at the statistics tells a more nuanced story as, to borrow a Dickensian turn of phrase, Republicans have presided over both the best of times and the worst of times. The market’s most successful run occurred under Republican Gerald Ford—a whopping 18.6% annualized. However, the elephants also own the only two losing records in modern (post-1945) market history, with George W. Bush (-4.6% annualized) and Richard Nixon (-5.1% annualized) both overseeing periods of extended bearishness.

electionThe Election Cycle

Having now examined the market’s ability to predict the winner of the election and the impact of parties on performance, let’s look at the influence of the presidential cycle on market returns.

Since 1833, the market has typically produced the best returns in the year preceding an election, averaging 10.4% annualized. Election years themselves have tended to be good as well, with average returns at right around 6%. The worst years in the election cycle have been the first and second years of a president’s term, averaging 2.5% and 4.2% respectively. The conventional logic has been that familiarity breeds comfort and that the uncertainty surrounding the economic policies of a new leader have driven low returns early in the cycle.

Why None of This Matters

Having gone to some pain to research the relationship between the election and the market, let me now suggest that none of what you have read above matters. None of it. Our desire to look for signal in the unending noise surrounding political campaigns is a waste of time at best and can be dangerous to our financial well-being at worst. The government produces data on 45,000 pieces of economic each year and when they are laid on top of the mountain of data collected by political scientists, correlations emerge and most of them are spurious. To quote political pollster Nate Silver, “The temptation that some economists succumb to is to put all this data into a blender and claim that the resulting gruel is haute cuisine.” To make this point more concretely, consider some of the following:

  • Since 1928, election years like this one without an incumbent running for reelection have been some of the worst on record, clocking a -2.8% annualized return. Had you been aware of and acted on this information, you would missed the 5.37% gain for the large cap index year to date.
  • As discussed above, the market tends to gain 6% in election years. Great, but small comfort to those who lost 34% in 2008, an election year. It has been joked that a six-foot man can easily drown in a river that is three feet deep on average (since many parts of the river might be much deeper). The same can certainly be said of market returns where long-term averages tend to mask the more dramatic volatility underneath. The performance of the market is more attributable to economic conditions than superior policies. Democratic Presidents Roosevelt and Obama both inherited markets broken by the Great Depression and Great Recession respectively. While both deserve credit for guiding the nation during difficult times, they are also the beneficiaries of a tendency for stock prices to mean-revert and bounce back from dramatic lows. Bulls and bears may have less to do with donkeys and elephants than the statistics might suggest.
  • Finally, consider the research suggesting that the first year of a President’s term leads to the most paltry returns. Had you acted on this knowledge, you would have missed the 23.45% rise in the market in Obama’s first year in office and the double-digit advance in the first year of Bill Clinton’s presidency. By definition, averages are generalities that are not true of any specific situation and relying on them can cause deviation from an otherwise sound financial plan.

Election years introduce volatility and uncertainty into financial markets that leave investors and advisors alike searching for a calm port in a wild political storm. But in our efforts to make sense of the political and economic landscape, we run a real risk of finding connections where none exist. In 2016, one of America’s most powerful political dynasties was nearly upended by an independent and self-proclaimed democratic socialist. The Republican Party is now helmed by a reality television star who has never held office. The Cubs are in the playoffs.

At uncertain times like this, investors must return to what Jason Zweig refers to as “controlling the controllable.” The outcome of the election and the accompanying market reaction are very much unknowable. What remains very much in your control are your ability to diversify across multiple asset classes, maintain a long-term focus and work closely with a competent advisor to manage your own behavior. I don’t know who will win the White House and neither do you, but I know with some certainty that patient investors adhering to first principles will always come out ahead.

Sources:

http://www.kiplinger.com/article/investing/T043-C008-S003-how-presidential-elections-affect-the-stock-market.html

https://tickertape.tdameritrade.com/investing/2016/08/can-election-predict-market-performance-10313

https://www.ml.com/articles/how-presidential-elections-affect-the-markets.html

http://money.cnn.com/2015/10/28/investing/stock-market-democrats-republicans/index.html

http://www.comstocksmag.com/article/data-driven-0

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Investment Insights Podcast: Your Third Quarter Status Report

Hart_Podcast_338x284Chris Hart, Core Investment Manager

On this week’s podcast (recorded August 30, 2016), Chris is back on the mic to provide a market update as the end of the third quarter draws near. Discussion topics include the health of global and domestic markets and reaction to the latest Fed meeting, but here a few quick hits before you listen:

  • So far in the third quarter, despite major indices posting modest losses last week, markets continue to move higher as we approach Labor Day and the end of summer.
  • Fed Chair Yellen is still not willing to commit to a rate hike, but also noted that the case for a rate hike has strengthened in recent months.
  • While the September rate hike probability fell to less than 10% post-Brexit, it has now moved to 42% according to Haver Analytics in recent weeks.
  • Overall, we remain constructive on risk assets, but believe prudence is warranted and volatility should continue to trend higher.

For the rest of Chris’s insight, click here to listen to the audio recording.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

August 2016 Monthly Market and Economic Outlook

Amy MagnottaAmy Magnotta, CFASenior Investment Manager, Brinker Capital

On this podcast, Amy reviews July’s market activity and provides an outlook into what’s in store for August and the rest of 2016. Here are some quick hits before you have a listen:

  • Investor confidence resumed and fears of global contagion dissipated when it became evident that the negative implications of the Brexit decision would likely be contained to the UK and areas of Europe.
  • U.S. real GDP data was lackluster, but consumer spending remained strong and jobless claims low.
  • Despite the shock of the Brexit decision during the end of the second quarter, international equities finished the month in strong positive territory, outpacing domestic equities.
  • We expect a higher level of volatility as markets assess the impact of slower global growth, the actions of policymakers and the uncertainty surrounding the U.S. presidential election; but our view on risk assets still tilts positive over the near term.

Click here to listen to the full podcast. A PDF version of Amy’s commentary is available to download in the Brinker Capital Resource Center. Find it here >>

Source: Brinker Capital. Views expressed are for informational purposes only. Holdings subject to change. Not all asset classes referenced in this material may be represented in your portfolio. Indices are unmanaged and an investor cannot invest directly in an index. All investments involve risk including loss of principal. Fixed income investments are subject to interest rate and credit risk. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting. Brinker Capital Inc., a Registered Investment Advisor.

Earnings Season Upon Us, but Information Void Looms

Raupp_Podcast_GraphicJeff Raupp, CFA, Senior Investment Manager

On this week’s podcast (recorded August 1, 2016), Jeff covers the current themes impacting markets, including Brexit, earnings season, and the presidential election. Highlights of his discussion include:

  • Since the initial negative reaction from the Brexit vote in late June, markets have rebounded sharply, with U.S. stocks up over 15% since the June 27 lows and international stocks up over 10%.
  • Late summer and fall loom as somewhat of an information void, where economic data is a little sparser and investors have a harder time seeing the impetus for the next leg up in the market.
  • It wouldn’t be surprising to see a pause in the upward momentum in the markets until we get more clarity about the direction of the election.
  • This past week, housing, earnings, employment and wages all had positive reports, but were offset by a very disappointing GDP number.

For Jeff’s full insight, click here to listen to the audio recording.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Carousel of Political Discontent

Stuart Quint, Investment Insights PodcastStuart P. Quint, CFA, Senior Investment Manager & International Strategist

Hung parliaments in three recent elections may have investment implications. On this latest podcast, Stuart discusses what’s happening in Spain, Austria and Australia.

Quick hits:

  • Recent elections in Spain, Austria, and Australia highlight that voters are divided and unable to render a clear mandate for government.
  • Other parts of Europe appear vulnerable.
  • Politics pose risk to financial markets; loose monetary policy likely to persist in many places.

What do Spain, Austria, and Australia have in common? (No, this is not a trivia question nor the opening line of a bad joke.)

Each country in recent weeks has held elections, all of which failed to elect governments backed by a majority of the vote (with one case leading to yet another election).  Tepid economic growth has led to divided voters that could make it more difficult for governments to enact policies needed to stimulate economies. They each are riding “a carousel of political discontent”.

Starting in Spain

On June 26, Spain held general elections for the second time in six months (results of which were overshadowed by the Brexit referendum).  Both elections failed to confirm one party with a sufficient majority to form a government.  In fact, the two centrist-right and left parties lost parliamentary seats to smaller fringe parties. However, the June election did result in a higher seat count for the ruling center-right party.  Hope exists for the incumbent center-right party to be able to form a coalition, though most likely without support of a majority of parliament.[1]

Sobering developments in Austria

In May, Austria tried to elect a president, an office with more ceremonial functions than real political power.  The two final candidates came from the Greens and the far-right Freedom Party, parties not belonging to the traditional establishment.  After a very slight victory (50.3% to 49.7%)[2] for the Green candidate, the Austrian Constitutional Court annulled the results and rescheduled the election for October.[3]  Austria potentially might be the first country in the EU to elect a president from the far right, a sobering development in light of populist antipathy to the Euro project.

Instability in Australia

Elections that were intended to solidify the ruling coalition in Australia could end up having the opposite effect.  The ruling Liberal-National party coalition has lost seats in both houses of Parliament and faces the risk of forming a minority government.  Yet again, fringe parties siphoned off votes both from the incumbents and main opposition party Liberals. Australia has already suffered through five different Prime Ministers in the last six years. The last thing it needs is another unstable government and the risk of political paralysis and potential new elections.

Notable similarities

Three different countries with three different cultures still share some common themes. Slow economic growth has contributed to disillusionment with establishment parties. The new wrinkle is that cohesion in the traditional opposition, as well as incumbent parties, is unraveling. Fringe parties representing both ideological (far right and left) as well as parochial interests are gaining. Though unable to govern themselves, these fringe parties potentially could play greater roles as “kingmakers” for establishment parties to form ruling coalitions. More focus would be spent on holding together the coalition and catering to parochial issues rather than carrying through reforms to stoke confidence in the economy. Weak coalitions are prone to collapse and thus, new elections.

What’s the impact on other countries?

Other candidates for this cycle of discontent stand out in Europe, particularly countries in the Euro.  With its past history of rotating governments, Italy might reemerge as the popularity of incumbent PM Renzi has taken a hit from reform setbacks and lack of economic growth. The fringe opposition party Five Star enjoys significant popularity as shown in victories in recent municipal elections. The party espouses holding a referendum on Italy’s membership in the Euro. It might see opportunity to challenge Renzi in October when a referendum on voting reform is scheduled. If Renzi were to lose that vote, early elections are likely to ensue.

France also stands out with a vigorous populist far-right opposition party in the National Front of Marine LePen.  General elections in 2017 with the incumbent government suffering from depressed approval ratings could introduce additional market volatility. Along with a stagnant economy, France has also suffered backlash against efforts to reform labor markets.

What needs to change?

Political malcontent with economic growth has the potential to continue and add to market volatility. It also could lead to paralysis on fiscal and structural reform needed to accelerate growth. One consequence is likely: central banks will not be retreating from active monetary policy anytime soon in the face of weak growth, even if much of their dry powder has already been spent. Government inaction will still be replaced by central bank stimulation unless the situation changes.

Click here to listen to the podcast.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, a Registered Investment Advisor.

[1] http://www.abc.es/espana/abci-rajoy-cita-manana-moncloa-201607051229_noticia.html  accessed on July 5, 2016.

[2] http://www.abc.net.au/news/2016-05-24/independent-van-der-bellen-wins-austrian-presidential-vote/7439372  accessed on July 5, 2016.

[3] https://www.theguardian.com/world/2016/jul/01/austrian-presidential-election-result-overturned-and-must-be-held-again-hofer-van-der-bellen accessed on July 5, 2016.

The Impact of Brexit

Amy MagnottaAmy Magnotta, CFASenior Investment Manager, Brinker Capital

An overview of highlights from our Investment Team on the impact of Brexit on markets and Brinker Capital portfolios.

Key Highlights:

  • Today is largely a retracement of last week’s market action. Over the last week, the MSCI EAFE Index was up over 7% and the Russell 3000 Index almost 2% as the market anticipated a “remain” vote. We’ve retraced that rally today, but global markets are only marginally down from levels seen a week ago.
  • Brinker Capital portfolios have generally been underweight to international markets, specifically developed international markets.
  • This vote is a political event, not an economic event. It marks the coming end of the UK’s trade agreement with the EU, but the process is one that will likely take years. What it has done immediately is increased the level of uncertainty in markets. We will likely see additional global central bank liquidity and easing in an effort to support economies and markets.
  • Emotional trading can create opportunities, so our focus over the coming weeks and months will be to identify and take advantage of these opportunities.

Brexit’s Impact on Global Economies and Markets

  • The economic and political impact on the UK is decidedly negative, but the degree of which is uncertain. The currency and equity markets will be weaker in the near term while the long-term outlook is unclear given the politics involved.
  • The negative economic impact on Europe is less, but still meaningful. From a political perspective, the departure highlights the rising risk of populism and becomes another distraction for the EU from much-needed reforms. We expect a weaker euro and European risk assets in the near term; the central bank could try to cushion some impact.
  • International markets will experience the indirect effects of lower global growth and general risk aversion.
  • We do not see it as having a significant direct impact on the U.S. economy; however, a strengthening U.S. dollar as a result will be a headwind for U.S. companies with significant international business.
  • Expectations for additional interest rate hikes by the Federal Reserve have plummeted. Today, the futures curve is predicting a zero chance of a rate hike in September (down from 31% yesterday) and a 14% chance in December (down from 50%).

How Brinker Capital is Positioned in Strategic Portfolios

  • Portfolios have been positioned with a meaningful underweight to international equity markets in favor of domestic equity markets.
  • The underweight has been concentrated in developed international markets, due to concerns over long-term structural issues in their economies that have an impact on economic growth.
  • We don’t anticipate any immediate changes to the portfolios as a result of these events as we feel we were well positioned ahead of the news, and we expect to reallocate portfolios in late July.

Overall Summary

  • We think this is an extended process that will develop over the coming months and years. Today, the market is pricing in the uncertainty, but this will be a fluid and evolving process.
  • The market selloff today has been relatively orderly and largely a retracement of the gains of the last week.
  • Our portfolios were well positioned in advance of the vote with an underweight to international markets.
  • We expect the uncertainty to result in higher levels of volatility, which creates opportunities for active management.

Source: Brinker Capital. Views expressed are for informational purposes only. Holdings subject to change. Not all asset classes referenced in this material may be represented in your portfolio. All investments involve risk including loss of principal. Fixed income investments are subject to interest rate and credit risk. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting. Brinker Capital Inc., a Registered Investment Advisor.

Investment Insights Podcast: Brexit Referendum Approaches

Stuart Quint, Investment Insights PodcastStuart P. Quint, CFA, Senior Investment Manager & International Strategist

On this week’s podcast (recorded June 15, 2016), Stuart discusses the potential repercussions facing the United Kingdom and the European Union should the vote for Brexit render a “yes” decision.

Highlights of this podcast are shared in our previous blog, but please click here to listen to the full audio recording.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, a Registered Investment Advisor.

Brexit: June Update

Stuart QuintStuart P. Quint, CFA, Senior Investment Manager & International Strategist

  • The UK referendum on Brexit to be held June 23 is coming down to the wire.
  • While polls are noisy and possibly unreliable like last year, a “Yes” for Brexit would stoke volatility for UK and other markets, particularly in Europe.
  • Brinker portfolios have been underweight developed international markets.

Following the March 3, 2016 blog on Brexit, markets have begun to reconsider the odds and implications of a potential departure of the UK from the European Union.

While the base case still appears slightly in favor of the UK remaining in the EU, the event of a “Yes” vote on Brexit could have moderate to sizable negative repercussions on markets. The UK stands to lose the most if it were to depart the EU. However, Europe could also enter another period of volatility as resurfacing doubts about European political cohesion could cloud already tepid economic recovery.

As previously mentioned, three major repercussions for the UK could consist of:

  1. A hit to direct trade with the rest of Europe
  2. Another Scottish independence referendum
  3. Job losses among UK multinationals based in the UK

Three potential repercussions for the EU could include:

  1. Another hit to GDP growth from trade disruption with the UK
  2. Magnified perception of European political risk in countries such as France and possibly Spain’s looming repeat of general elections a few days after the Brexit referendum
  3. Distraction for Europe to working through economic and foreign policy issues

Additionally, Spanish elections (for the second time in 6 months after failure to form a coalition government) will occur a few days after the Brexit referendum. The rise of non-traditional parties could once again keep or enhance chaos in Spanish politics.

A “Yes” vote is likely to keep the Fed on hold from raising interest rates given the uncertain fallout to financial markets and US exports. Even a vote to remain could keep the Fed on hold temporarily.

Brinker Capital portfolios in general have been underweight developed international equities. After having been neutral last year, portfolios reduced exposure in March due to concerns on the limits of loose monetary policy alone to bolster growth without meaningful structural reform. While it is quite possible that Brexit risks fade, this added an additional factor of volatility that motivated the reduction of international developed equities portfolios.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

June 2016 Monthly Market and Economic Outlook

Amy MagnottaAmy Magnotta, CFASenior Investment Manager, Brinker Capital

After a weak start to the month, risk assets finished May with strong returns. Despite increased rumblings for a mid-year Fed rate hike creating uncertainty in the market, climbing oil prices and strong housing data helped uphold investor confidence and worked as a catalyst for positive gains during the month. Corporate earnings generally beat analyst expectations, but overall earnings growth is still negative year-over-year. Markets were volatile and we expect this trend to likely continue as central bank actions continue to unfold and we move closer to the end of the business cycle.

The S&P 500 Index gained 1.8% for the month, finishing just shy of the all-time high reached in May 2015.  Sector performance was mixed. Energy, materials and industrials lagged for the month, but still remain in positive territory year-to-date. Technology, healthcare and financials sectors had strong performance with technology posting returns of over 5%. Growth outpaced value in large and small caps and was equivalent in mid cap. Small and micro cap stocks outperformed large cap stocks.

International equity markets lagged U.S. equity markets.  Although international equities experienced a similar pullback in the beginning of the month, the subsequent rally failed to pick up the same momentum as U.S. equities.  A strong dollar coupled with weak profit growth and uncertainty surrounding the potential Brexit were drags on performance.  Emerging markets lagged developed international equity markets; with almost all EM countries finishing the month in negative territory. In particular, Latin America posted double-digit negative returns resulting from political turmoil in Brazil.

The Barclays Aggregate Index was flat for the month with most sectors finishing either flat or in slightly negative territory. Treasury yields fell mid-month only to rise back up as the market began pricing in the possibility of another Fed rate hike. Treasury yields ended the month relatively unchanged from beginning levels and the investment grade credit was flat.  High yield spreads slightly contracted and the asset class eked out a small gain. Municipals also finished slightly positive.

We remain positive on risk assets over the intermediate-term; however, we acknowledge that we are in the later innings of the bull market that began in 2009 and the second half of the business cycle. The worst equity market declines are typically associated with recessions, which are preceded by aggressive central bank tightening or accelerating inflation, factors which are not present today. While our macro outlook is biased in favor of the positives and a near-term end to the business cycle is not our base case, the risks must not be ignored.

A number of factors we find supportive of the economy and markets over the near term.

Global monetary policy remains accommodative: The Fed’s approach to tightening monetary policy is patient and data dependent. The Bank of Japan and the ECB remain supportive.

Stable U.S. growth and tame inflation: U.S. economic growth has been modest but steady. While first quarter growth was muted at an annualized rate of +0.5%, we expect a bounce in the second quarter as has been the pattern. Payroll employment growth had been solid, but May’s report was disappointing. Wage growth has been tepid at best despite the tightening labor market, and reported inflation measures and inflation expectations, while off the lows, remain below the Fed’s target.

U.S. fiscal policy more accommodative: Fiscal policy is modestly accommodative in 2016, helping offset more restrictive monetary policy.

Constructive backdrop for U.S. consumer: The U.S. consumer should see benefits from lower energy prices and a stronger labor market.

However, risks facing the economy and markets remain, including:

Risk of policy mistake: In the U.S. the subsequent path of rates is uncertain and may not be in line with market expectations, which could lead to increased volatility. Negative interest rates are already prevalent in other developed market economies. An event that brings into question central bank credibility could weigh on markets.

Slower global growth: Economic growth outside the U.S. is decidedly weaker, and while China looks to be improving, a slowdown remains a concern.

Another downturn in commodity prices: Oil prices have rebounded off of the recent lows and lower energy prices on the whole benefit the consumer; however, another significant leg down in prices could become destabilizing. This could also trigger further weakness in the high yield credit markets, which have recovered since oil bottomed in February.

Presidential Election Uncertainty: The lack of clarity will likely weigh on investors leading up to November’s election. Depending on the rhetoric, certain sectors could be more impacted.

The technical backdrop of the market has improved, as have credit conditions, helped by a macroeconomic environment that leans favorable. Investor sentiment moved from extreme pessimism levels in early 2016 back into more neutral territory. Valuations are at or slightly above historical averages, but we need to see earnings growth reaccelerate. We expect a higher level of volatility as markets assess the impact of slower global growth and actions of policymakers; but our view on risk assets still tilts positive over the near term. Higher volatility has led to attractive pockets of opportunity we can take advantage of as active managers.

Source: Brinker Capital. Views expressed are for informational purposes only. Holdings subject to change. Not all asset classes referenced in this material may be represented in your portfolio. All investments involve risk including loss of principal. Fixed income investments are subject to interest rate and credit risk. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting. Brinker Capital Inc., a Registered Investment Advisor.