Q3 Outlook: Summertime for Investors?

From a strategic perspective, the current market environment is increasingly challenging for asset allocators. We see four reasons for this:

1. Bond yields are low, so eventual interest rate increases would threaten total returns
2. The rally in equities from their trough last year has been extremely strong, with some valuations looking frothy
3. The correlation between bonds and stocks is turning negative
4. This economic cycle might be unusually compressed – we appear to have gone from early to mid-cycle within 12 month