BIBL BIL BXUB BXUC CHGX CLTL CRF DDM DFVL DFVS DIA DLBL-OLD DLBS DMRL DOG DTUL DTUS DTYL DTYS DUSA DXD EDOW EDV EEH EGF EPS EQL EQWS ESGL FEX FIBR FTT FWDD Games GBIL GOVT GSEW GSY HUSV HYDD IEF IEI ITE IVV IWL IWM JHML JKD Neuberger Berman OMFS OPER OTPIX PLW PMOM PPLC PSQ PST QID-OLD QLD QQEW QQQ QQQE QQXT RISE RSP RVRS RWM RYARX RYRSX SCAP SCHO SCHR SCHX SDOW SDS SFLA SH SHV SHY SMLL SPDN SPLX SPSM SPTL SPTS SPUU SPXE SPXL SPXN SPXS SPXT SPXU-OLD SPXV SPY SQQQ SRTY SSO SYE TAPR TBF TBT TBX TLH TLT TMF TMV TNA TQQQ TTT TUZ TWM TYBS TYD TYNS TYO TZA UBT UDOW UDPIX UPRO URTY USA USMC USSD UST USTB USWD UWM VFINX VGIT VGLT VGSH VOO VTWO VUSTX VV ZF ZROZ

Late Cycle, Early Days | Seeking Alpha

Late Cycle, Early Days | Seeking Alpha

By Joseph V. Amato, President and Chief Funding Officer – Equities

The enlargement is growing older, however main shifts for buyers are simply underway.

Markets have been displaying strains which might be intently tied to the getting older financial cycle. A key set off for October’s volatility was robust U.S. knowledge and its hawkish implications for central financial institution coverage. Rates of interest moved sharply upward and lots of danger belongings downward. This was acquainted territory for international markets, which have suffered underneath a cloud of slowing progress and commerce fears, however extra uncommon for U.S. buyers, who’ve been comparatively insulated from such considerations given U.S. earnings momentum supported by tax cuts and deregulation.

Bond buyers are involved about each coverage charges and unwinding of central financial institution stability sheets, and are leery of a U.S. federal finances deficit that may possible hit over $1 trillion subsequent yr. Greater brief charges are making U.S. Treasuries much less interesting to overseas buyers who should hedge their foreign money danger. All of those are dampening forces and should recommend that the therapeutic could possibly be extra anemic than after the February market swoon.

That stated, the general financial image within the U.S. is sort of robust and probably supportive of U.S. shares. Shopper confidence stays excessive, enterprise exercise and hiring are wholesome, and unemployment is at a 50-year low. GDP is predicted to return in at almost three% this yr, whilst inflation stays largely beneath management. In our view, the present enlargement is more likely to stay in place for now, with a potential rotation from progress to worth shares and different beneficiaries of late-cycle enlargement. A caveat is that overly aggressive price hikes or damaging commerce wars might finish issues early.

General, the surroundings is more likely to be fluid and at occasions risky, and requires heightened focus from buyers. Nonetheless, it is going to be essential to maintain perspective and take into consideration the long run – notably given the “seismic shifts” we anticipate over the approaching decade. As mentioned in our cowl story, key tendencies embrace the lingering results of the post-crisis debt explosion, the blurring line between rising and developed markets, the expansion of personal investments and the explosion of know-how, all of which have probably profound implications for funding strategies and alternatives. The opposite matter on this difficulty seems to be at down-markets and methods to organize for them.

I hope you take pleasure in this difficulty of Funding Quarterly. As all the time, please don’t hesitate to contact your Neuberger Berman consultant with any questions or feedback.

Highlights 4Q18

From the Asset Allocation Committee

U.S. Equities: The U.S. has maintained robust financial progress regardless of weaker tendencies in Europe and China, and is predicted to profit from strong company earnings on the again of tax reform. Though our 12-month outlook for the phase is impartial general, we modestly favor small and mid-caps on a relative foundation given their extra home gross sales combine. Commerce tensions and probably waning advantages of tax reform are among the many dangers.

U.S. Fastened Revenue: Though rising rates of interest are creating headwinds for many funding grade bonds, we favor Treasury Inflation-Protected Securities (TIPS) given inflation dangers tied to wages and commerce tensions. Though impartial on excessive yield general, we favor short-duration excessive yield, particularly relative to financial institution loans, given their broad credit score spreads and comparatively low sensitivity to rising charges.

Non-U.S. Developed Market Equities: In Europe, key enterprise exercise indices have settled at decrease ranges, which might recommend slower progress, however the ECB stays accommodative even because it prepares to wind down its quantitative easing program. In Japan, a weaker yen might increase company earnings, and the Financial institution of Japan stays dedicated to its yield concentrating on coverage.

Rising Markets: We keep our obese view for each debt and fairness, regardless of short-term volatility and destructive sentiment associated to international commerce tensions. Whereas acknowledging the danger of an extra leg down, we consider that the rising markets sell-off was overdone and presents a chance.

Hedge Funds: Diversification into uncorrelated, low-volatility hedge funds can present a considerate strategy to managing danger in durations of elevated correlation. Extra dispersion throughout belongings, in addition to clearer tendencies in sure markets, might create alternatives for lengthy/brief funds.

Personal Fairness: Regardless of elevated valuations, a modest portfolio allocation to non-public fairness and debt could also be engaging relative to publicly traded shares and bonds, offering a possible illiquidity premium and decrease mark-to-market volatility.

This materials is offered for informational functions solely and nothing herein constitutes funding, authorized, accounting or tax recommendation. This materials is basic in nature and isn’t directed to any class of buyers and shouldn’t be considered individualized, a suggestion, funding recommendation or a suggestion to interact in or chorus from any investment-related plan of action. Funding selections and the appropriateness of this materials ought to be made based mostly on an investor’s particular person goals and circumstances and in session together with his or her advisors. Info is obtained from sources deemed dependable, however there isn’t any illustration or guarantee as to its accuracy, completeness or reliability. All info is present as of the date of this materials and is topic to vary with out discover. Any views or opinions expressed might not mirror these of the agency as an entire. Neuberger Berman services will not be obtainable in all jurisdictions or to all shopper varieties.

The views expressed herein might embrace these of the Neuberger Berman Multi-Asset Class (MAC) group, Neuberger Berman’s Asset Allocation Committee and Neuberger Berman’s Funding Technique Group (ISG). The Asset Allocation Committee is comprised of execs throughout a number of disciplines, together with fairness and glued revenue strategists and portfolio managers. The Asset Allocation Committee critiques and units long-term asset allocation fashions, establishes most popular near-term tactical asset class allocations and, upon request, evaluations asset allocations for giant diversified mandates. Tactical asset allocation views are based mostly on a hypothetical reference portfolio. ISG analyzes market and financial indicators to develop asset allocation methods. ISG consists of 5 funding professionals and works in partnership with the Workplace of the CIO. ISG additionally consults frequently with portfolio managers and funding officers throughout the agency. The views of the MAC group, the Asset Allocation Committee and ISG might not mirror the views of the agency as an entire, and Neuberger Berman advisers and portfolio managers might take opposite positions to the views of the MAC group, the Asset Allocation Committee and ISG. The MAC group, the Asset Allocation Committee and ISG views don’t represent a prediction or projection of future occasions or future market conduct. This materials might embrace estimates, outlooks, projections and different “forward-looking statements.” On account of quite a lot of elements, precise occasions or market conduct might differ considerably from any views expressed.

Investing entails dangers, together with potential lack of principal. Investments in hedge funds and personal fairness are speculative and contain a better diploma of danger than extra conventional investments. Investments in hedge funds and personal fairness are meant for classy buyers solely. Indexes are unmanaged and will not be out there for direct funding. Previous efficiency is not any assure of future outcomes.

This materials is being issued on a restricted foundation via numerous international subsidiaries and associates of Neuberger Berman Group LLC. Please go to www.nb.com/disclosure-global-communications for the precise entities and jurisdictional limitations and restrictions.

The “Neuberger Berman” identify and emblem are registered service marks of Neuberger Berman Group LLC.

© 2009-2018 Neuberger Berman Group LLC. All rights reserved.

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