- In the first half of the CY, markets rallied on strong economic trends. In the September quarter
however, markets traded lower. If inflation continued to recede and the US economy remained
strong, there would be little impetus for the Fed to cut rates and stimulate the economy.
- Rising bond yields have detracted performance of interest rate sensitive sectors and long duration
assets such as large cap tech stocks.
- Cautious of US fiscal position, increasing debt levels outside of quantitative easing periods can raise
supply more than demand, leading to higher yields.
- Discrepancies between market behaviour and Innova’s leading economic indicators raise concerns
and call for a cautious approach. This consequently leads to slower economic trends, market
volatility and therefore defensive positioning.
- There has been a clear separation between US large cap and the rest of the equity universe
valuations. Unlike US large caps, many equity markets globally are trading close to or slightly below