By Chris Konstantinos, CFA, RiverFront Investment Group
In our 2019 Outlook , our base case scenario pointed to a positive outcome for stock markets for 2019…but that outlook was highly dependent on the path of key market drivers that we called the ‘3 Rs’: Rates, Resolution of Trade, and Recession Risk.
While a month certainly doesn’t make a year, the facts on the ground suggest that our ‘3 Rs’ are thus far mostly trending somewhere between our ‘base’ and ‘optimistic’ case, including positive news on both trade and Fed interest rate policy this past week.
Global stock markets have responded accordingly, with big rallies year-to-date in most regions and the S&P 500 now having retraced more than two-thirds of its recent weakness after its best January in 30 years. RiverFront’s tactical allocation process has also responded to these improving fundamentals by putting some excess cash to work in various asset classes which we view as having been overly punished in the fourth quarter selloff, including US small-caps and international equities. In our long-horizon portfolios, we focused our international additions on emerging market securities.