During the quarter, equity markets experienced volatility but ended at a slightly higher level. The United Kingdom’s unexpected vote to leave the European Union (Brexit) drove most of the volatility, although the long-term effects of this decision are unclear for now. Continued aggressive monetary policy on the part of foreign central banks has driven $11.7 trillion of global debt into negative-yield territory. Expectations for the Federal Reserve’s next interest rate increase have been pushed into 2018. Global investors’ focus on yield has driven returns this year. The U.S. economy continues to expand at a slower pace than last year, but stabilization in the industrial segment of the economy may improve this outlook. Housing remains a bright spot. Low interest rates and healthy employment statistics should support further improvement and, by extension, greater consumer spending. Volatility is likely to stay elevated as investors closely watch Brexit, China, the Fed, the U.S. presidential election cycle, and commodity prices. For now, we position portfolios for modest economic growth.
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