LDI: A Statistical and Qualitative Review of Q4 2017 & Investment Outlook

Key Q4 Takeaways:

  • Tax reform was enacted proving positive for equity investors but potentially introducing some idiosyncratic risks in credit markets.
  • The market rally was strong and persistent into year-end as equities posted multiple new highs and spreads tightened to recent lows.
  • The yield curve flattened as the Fed carries on with hikes, while the long-end of the Treasury curve is slow to digest the potential impacts of larger deficits, reversal of Quantitative Easing (QE) and labor inflation.
  • Investors continued to show complacency as evidenced by historically low levels of volatility across most asset classes.
  • Economic growth appears sustainable across most regions underpinning the strength in corporate earnings and asset prices.

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