The second quarter of 2018 saw the return of volatility, elevated trade war rhetoric, and rising inﬂation. Unemployment fell to multi-decade lows, Q1 earnings for US companies came in well-above expectations, and Q2 estimated earnings growth nears its highest since 2010. Despite strong fundamentals, we believe there are signiﬁcant risks to markets that are already trading at top quartile or higher valuations. Thus, our portfolio remains defensively positioned with a slight underweight to public equities and an overweight to safe ﬁxed income, including Treasury Inﬂation-Protected Securities (“TIPS”).
Halite’s investment team seeks to identify exceptional value for our partners by finding the best risk-adjusted return across both public and private markets. We believe that current yields available in public fixed income instruments do not appropriately compensate investors for the underlying credit risk they are taking. However, we deem private credit markets to be attractive because investors can earn significant amounts of extra yield in exchange for giving up liquidity, while still maintaining a healthy risk profile.
Active vs. passive investing is the age-old debate in investment management, and it’s one that has garnered endless media coverage. While I’m not going to argue one way or the other – the debate really isn’t black and white, after all – I would like to propose an alternative way of thinking about the topic: ‘smart passive’ investing.
Famous investor Sir John Templeton once said, “The four most dangerous words in investing are: ‘This time it’s different.’” Despite a strong equity rally in January, stocks and bonds posted a negative return for the first quarter of 2018. As we predicted in our last newsletter, volatility is returning to the markets in a significant way. Investors now face a backdrop of rising inflation and elevated trade war rhetoric.
Open our 1Q 2018 newsletter to find out what this all could mean and to learn why Halite Partners continues to be underweight equities and overweight TIPS (Treasury Inflation-Protected Securities).
2017 was unique in that investment markets were both calm and profitable. Each of the major equity, bond, and commodity markets that we track traded steadily higher throughout the year, ending with yet another year of positive returns.