There is no change to the risk budget this month. For the moderate risk investor, the allocation between risk assets and bonds is unchanged at 50/50. There are no changes to the portfolio this month.
Growth and inflation expectations rose somewhat since last month’s update. The change is minor though and within the range of what we’ve seen in recent months. The most significant change from last month is the continued drop in the US Dollar as growth expectations for the rest of the world continue to outpace US expectations. The dollar has lost considerable luster since the beginning of this year when everyone thought it had nowhere to go but up. Absent some kind of legislative win from the Trump administration, I see no reason to think the trend is about to reverse although sentiment is getting a mite negative on the greenback.
The weak dollar is mostly having the impact on markets one would expect. International stock markets are outperforming which is nice since our portfolio is positioned to benefit from just such a trend. Gold and other commodities haven’t responded as positively but gold is at least up over the last six months. Commodities more generally are down on the year, mostly a reflection of the drop in crude prices. If the dollar keeps falling I would expect commodity performance to improve. Real estate, another real asset sensitive to dollar movements, is performing well both domestically and internationally.
This post was published at Wall Street Examiner on July 17, 2017.