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The election is over and the transition of power is complete and many have listed this change of the US administration as the beginning of a new era, and in many respects it is.

Regarding the plight of the financial markets, the future poses a perplexing conundrum as far as asset allocation is concerned, not to mention risk management.  Recent economic activity appears positive, with US equities posting a double digit return in 2016 and major indexes trading near highs, a strong US$, bond yields assimilating a recent rate hike and unemployment under 5%.  Reality, however remains that financial markets are a function of global zero interest rate policies among major economies that have caused misallocations of investments seeking returns anyway they can, where risk has been under-weighted and therefore valuations of many assets.

As far as employment is concerned, the labor non-participation rate remains alarmingly high and other indicators such as real wages and savings rates and general accumulated wealth of the population are at problematic levels.

Yes, the future is perplexing, and the Doc raises the warning of substantial risk arising from geopolitical factors that may cause significant reallocations of financial assets around the globe over the long run.  This should be an evolving phenomena that our team will be addressing as it arises.  At this stage we are neutral on Equities and longer dated US government fixed income levels, and favor at least one more, small rate hike over the next month or so.  Yes…we are back.


Stephan Kudyba (MBA, PhD)                      THE MARKET DOCTOR


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