Page 4 - ISQ UK JANUARY 2020

INVESTMENT STRATEGY QUARTERLY

Letter from the Chief Investment Officer (cont.)

#8: Blurred Vision for International Equities #10: Volatility is Hiding in Plain Sight

Our preference for US equities over international equities was a With 2019 being the best year for US equities since 2013 and
relatively easy choice over the past several years. However this aggregate bonds since 2002, investor complacency and
year, the line between the two is beginning to blur. A possible elevated expectations are evident. However, with relatively
bottoming in Europe’s economic data, attractive valuations on more expensive markets versus last year, volatility is hiding in
a relative basis, an acceleration in earnings growth, and the plain sight. From trade wars to impeachment, and from growth
possibility of substantial fiscal stimulus packages (especially in concerns to geopolitical tensions, there is no shortage of
Germany) have the potential to propel international equities headline risk for 2020. The burden remains on us to decipher if,
moving forward. We maintain our view on emerging markets as and when, any of these headlines alter our economic or asset
an appealing allocation for long-term investors. class views in a demonstrable fashion. Increased volatility and
#9: A Panoramic View of the Dollar and Oil the aging bull market make selectivity at the regional, sector,
and individual stock level even more important.

After rallying six times in the last seven years, a further broad
based rally in the US dollar is unlikely. A Fed on hold, We always encourage investors to keep their eyes on the prize
decelerating US economic growth and burgeoning twin deficits and follow a well-thought out financial plan that tailors an
will likely keep a stronger dollar out of view. A stable, slightly appropriate asset allocation in light of specific investment
weaker dollar is a positive for commodities. Specifically, we objectives and risk tolerance. While we provide our lens in
believe that oil prices will recover to six-year highs by the end of which to view the economy and various asset classes,
2020 and rally to $65/barrel. Our expectation that global oil wealth managers can provide further insights into portfolio
demand will grow slightly faster in 2020 than 2019 (and mark 11 positioning.
consecutive years of growth) is supportive of this view.
Furthermore, the slow upward movement in oil prices has
exerted pressure on the capital budgets of US oil and gas
companies which should translate into a sharp slowdown in US
oil production.

Lawrence V. Adam, III, CFA, CIMA®, CFP®
Chief Investment Officer, Private Client Group

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