This summary report of the second quarter provides a high-level view of global economic data as well as global and U.S. economic trends. In addition, it examines individual market segments, including U.S. fixed income, U.S. equity, global equity, international equity, hedge funds, private equity, and real assets.
To achieve lower borrowing costs and longer payment schedules for bond-issuing eurozone countries, bond alchemists (or policymakers) must ensure that the banks holding periphery bonds don't suffer significant losses, that the issuing countries can return to the markets, and that investors are confident the countries won't default.
Investors buy gold out of fear that the economic and political infrastructure we count on when we buy stocks and bonds is degrading. And gold booms inevitably end with a bust. The better strategy may be to build a reasonably sized position in diversified commodities, including gold; play close attention to sound entry points; and rebalance religiously.
Concerns about excess government debt and inflation have increased interest in gold and raised its price. Gold is a commodity that behaves more like a currency, providing no investment return beyond price fluctuation. Gold's high price undermines its protective characteristics, making it more vulnerable to declines as monetary policy normalizes.
At the 2011 FOX Wealth Advisor Forum, a FOX executive reviewed the top trends contained in the current FOX Wealth Trends™ and discussed the findings with two leading wealth advisors who explained how they see the trends manifesting themselves in their practices.
U.S. interest rates are unlikely to spike at the end of QE2 because the market has already priced in the completion of Fed purchases, but moves toward fiscal consolidation in Europe are likely to damp economic growth. Policymakers need to proceed cautiously with normalization as they have little ammunition left to battle renewed weakness in aggregate demand.
Developments in the European Monetary Union and the United States have raised new questions about whether political systems can deliver timely solutions to medium-term fiscal imbalances. However, the authors do not believe these imbalances will derail the global recovery, lead to problematic inflation, or prevent companies from making money.
While political upheaval in the region is a legitimate concern for investors, the tumult provides an entry point into what may become an increasingly important market. Economic fundamentals are strong, the regional GDP is improving, and governments are supporting programs and infrastructure to facilitate growth.
The U.S. economy lacks clear drivers of sustained growth, and there is no "quick fix" for the housing and structurally high unemployment situations. While there is much debate about what the federal government can and cannot do to change this dynamic, it is hard to see any real solution other than a gradual, often volatile recovery pattern over several years.
It may be difficult for consumers to sustain current spending levels given the sticker shock of prices at the pump. Add to the mix a move higher in interest rates, cuts in unemployment benefits and other services, and a restructuring of the Social Security and Medicare/Medicaid system as we know it, and it would seem the downside risks to growth are mounting.