The valuation picture suggests low forward returns for equities. In our opinion, alternative investments should play a bigger role in portfolio construction, given poor risk-reward dynamics.
Intermarket relationships improved considerably over the short-term but are still leaning defensive over a majority of time frames. The strength in US stocks has moved them back into a neutral trend in two out of the three time frames we monitor.
Economic growth remains negative although there has been some improvement in leading economic indicators since the lows. The recovery to growth could take longer than expected.
Monetary policy should remain accommodative due to negative economic growth, however rising inflation could put the Fed in a box.
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