·Fed policy appears to be shifting toward price level/nominal GDP targeting. A price level targeting policy is geared to raising inflation expectations, thereby creating a backdrop conducive to increase spending. Maintain core TIPS holdings as a hedge.
·Treasury yields are at risk of moving higher. We calculate "fair value" at 2.3%, using the 10-year maturity. An overshoot to 2.5%+ would create a buying opportunity.
·The oil markets have largely rebalanced according to energy analyst Matt Conlan, at BCA Research. We believe there is increasing risk of a spike upwards in 2017.
· Global growth is stagnant, but marginally positive. Policymakers in the U.S./China, which collectively account for roughly 38% of global GDP, are slowly shifting to targeting more stimulus via fiscal thrust.
·The S&P 500 has entered an overshoot phase, which could ultimately reach 2400. Over the intermediate-term the market is overbought and may consolidate/correct its recent gains above 2050.
· We are maintaining our defensive industry core holdings, while selectively adding cyclical exposure. Our foreign holdings in China "H" shares, Japan (currency hedged) and Europe offer better value.
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