Page 3 - ISQ UK_October 2017

OCTOBER 2017
INVESTMENT STRATEGY COMMITTEE MEMBERS
Each quarter, the committee members complete a detailed survey sharing their views on the investment environment, and their responses are the basis
for a discussion of key themes and investment implications.

Andrew Adams, CFA, CMT, Senior Research Associate, Nick Goetze Managing Director, Fixed Income Services Scott Stolz, CFP Senior Vice President,
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Equity Research PCG Investment Products
Peter Greenberger, CFA, CFP Director,
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Chris Bailey European Strategist, Mutual Fund & 529 Plan Product Management Jennifer Suden, CFA, CAIA Director of
Raymond James Euro Equities* Alternative Investments Research
Nicholas Lacy, CFA Chief Portfolio Strategist,
Scott J. Brown, Ph.D. Chief Economist, Asset Management Services Tom Thornton, CFA, CIPM Vice President,
Equity Research Asset Management Services
Pavel Molchanov Senior Vice President,
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Robert Burns, CFA, AIF Vice President,
Asset Management Services Energy Analyst, Equity Research Anne B. Platt, AWMA , AIF – Committee Chair
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James Camp, CFA Managing Director of Fixed Income, Eagle Kevin Pate, CAIA Vice President, Asset Management Vice President, Investment Strategy & Product Positioning,
Asset Management* Services Wealth, Retirement & Portfolio Solutions
Doug Drabik Senior Strategist, Fixed Income Paul Puryear Director, Real Estate Research Kristin Byrnes – Committee Vice-Chair
J. Michael Gibbs Managing Director of Equity Portfolio & Jeffrey Saut Chief Investment Strategist, Product Strategy Analyst, Wealth, Retirement & Portfolio
Technical Strategy Equity Research Solutions
• “To me, the Fed’s balance sheet unwind is a non-event. The • “We need houses – the same message as last quarter. We just can’t
numbers that I’ve looked at suggest a two-year unwinding of build moderate- to low-priced housing. The economics just don’t
$600 billion, maybe 25 or 30 basis points assuming the Fed sticks work and we don’t see that changing any time soon.”
with their plan, which they really haven’t done for the last four or • “It’s a healthy environment. We’ve got residential fixed investment
five years. We were supposed to get a number of rate hikes this going up. That’s a data point that we track very closely. Typically
year. We may be done, so I think dovishness still rules the globe. when it’s increasing, the economy is doing well. If it turns and starts
Central bank balance sheets are still expanding.”
to head the other way, we’re going to get very nervous. In a lot of
• “The amount of liquidity, risk-taking, and the lack of discipline in ways, it’s an indicator of what the consumer is doing. Right now,
the debt markets, at least on the taxable side, is extraordinarily that all looks good to us.”
loose.”
• “We have 6 - 7% inflation in residential real estate. I’m talking 6 - 7%
– James Camp, CFA, Managing Director of Fixed inflation replacement cost relative to income growth. That’s not a
Income, Eagle Asset Management* good equation, and we don’t see that changing.”

ENERGY AND OIL – Pavel Molchanov, Senior Vice President, Energy ALTERNATIVE INVESTMENTS – Jennifer Suden, CFA, CAIA, Director
Analyst, Equity Research of Alternative Investments Research, PCG

As of September 30, energy was 6.1% of the S&P 500 market cap, just about Investment Products
the lowest level in 14 years. Our view is that this is absolutely a place that In terms of fee transparency, managers are responding to investors’
ought to be overweighted, because it’s hard to see how much lower it can demands and concerns. They are coming up with somewhat more
get. creative ways of addressing fee structure concerns.
• “In regard to Hurricane Harvey, one-fifth of U.S. refining capacity, • “We are seeing allocations to global macro funds creep up. We
which is 4% of the world’s refining capacity, was offline. That’s an haven’t seen very much in terms of volatility and dislocations
extremely impactful statistic, much more impactful compared to across the globe over the last few years. For those investors that are
Hurricane Katrina. However, structural damage looks very, very expecting an uptick in volatility levels, global macro funds tend to
small. Yet, shutting down and restarting a refinery takes time. play well in more volatile environments and when there are those
It will take a period of weeks, maybe months at the most, until global dislocations.”
these are up and running again.”
• “We’re also seeing allocations picking up in long-short equity, as
• “The amount of crude production that was offline was never people are looking to continue to participate in equity markets
particularly needle-moving, which is why we didn’t see a run on but with some sort of downside protection. The long-short equity
crude prices. At the peak, Gulf of Mexico outages were 400,000 funds have actually been doing quite well as we are starting to see
barrels a day compared to refining, which was ten times the an increase in alpha creation on the short side.”
scale.”

HOUSING – Paul Puryear, Director of Real Estate Research, Equity
Research
As far as housing is concerned, nothing has changed in the past few months.
We’re tracking along very modestly with housing starts.

*An affiliate of Raymond James & Associates, Inc. and Raymond James Financial Services, Inc. 2