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OCTOBER 2017

companies in the U.S. large-cap space with higher margins, more major geopolitical shock, volatility tends to spike following an
growth opportunities, and a shift from tangible to intangible assets unforeseen event, leading to significantly more bearish market
are gaining more and more market share. This begs the question: to responses as opposed to a more controlled increase in activity.
what degree are they overvalued? Additionally, is history the most
appropriate basis to make this call given these changes? The direction and timing of the markets are anyone’s guess,
particularly when it relates to unanticipated shocks. Since it seems
CENTRAL BANK POLICY likely that we just won’t know until we know, it’s important to
Following the financial crisis of 2008, central banks around the manage your investments to the appropriate risk profile to ensure
world have been passing out healthy doses of quantitative easing that proper safeguards are in place to protect your assets if and
(which injects cash into the system), producing an accommodative, when the equity markets unexpectedly turn.
low interest-rate environment flush with cash. Where has much
of that cash gone? To the global equity markets, which has
resulted in its best performance run since 1998 according to the
MSCI All Country World Index.

THE GLOBAL ECONOMY
It’s not just financial market volatility experiencing these summer
doldrums; global economic volatility has been low as well. Key
drivers in the United States include reduced volatility in the job
market, smoother corporate profits, and smoother government
spending, which has historically been choppy. KEY TAKEAWAYS:
• While current volatility levels are by no means ‘normal’ from
Increasing market share of the service sector has contributed to the a historical standpoint, it doesn’t necessarily mean they are
longer-term trend of quieter economic growth, which has unwarranted or unprecedented.
traditionally been one of the less volatile sectors. Additionally,
manufacturing is experiencing more consistent growth as • Despite the fear that the markets are overvalued and a
advancements in technology continue to improve inventory controls. pullback or correction is inevitable, we can’t ignore the
general health of the equity markets.
WHAT DOES THIS MEAN FOR THE MARKETS GOING FORWARD?
Some market experts do not see this extended period of complacency • It’s important to manage your investments to the
as the ‘new norm’ and warn that investors are not accurately appropriate risk profile to ensure that proper safeguards
accounting for tail risks, or ‘black swan’ events. While there are valid are in place to protect your assets if and when the equity
reasons which support the lack of activity, volatility is likely to return markets unexpectedly turn.
at some point. Whether due to tightening central bank policy or a

Diversification does not guarantee a profit nor protect against a loss. The companies engaged in the technology industry are subject to
fierce competition and their products and services may be subject to rapid obsolescence. The returns mentioned do not include fees and
charges which would reduce an investor's returns. Past performance may not be indicative of future results. Investing involves risk
including the possible loss of capital.

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