Cautious – Patient – Selective
Author: Suny Park, CFA, CPA, Chief Institutional Client Strategist, Janus Capital Management LLC
Debates abound on what to make of financial markets' recent behavior. We assess the fundamentally driven changes and outline several levers of active management that investors can pull to help close the return gap.
A New Mindset for a Shifting Risk and Low Expected Return Environment
Despite concerns about central bank monetary policies, flattening of the U.S. yield curve, duration of the current equity bull market and the trade standoff between the U.S. and China, most investors do not appear to be doing anything different than at the beginning of 2018, when the consensus view in financial markets centered on coordinated global growth. One should not, however, infer a lack of thoughtful analyses from their inaction or maintaining the status quo. Beneath the surface, there is a debate raging among institutional investors on what to make of financial markets' recent behavior. We believe the changes taking place in financial markets appear more fundamentally driven and detrimental to investors' capital for years to come. Given lower expected returns, shifting monetary policy and resurgent market volatility, we outline how investors can pull different levers of active management to help close the return gap.