Tactical allocation takeaways

Will future profit growth support equity valuations? Inflation, tariffs, employment, interest rates, war, tax cuts, regulation/deregulation, technology developments, debt, and deficits… There are many factors to consider in today’s markets, but in the end, it boils down to that one question for equity investors. Valuations may give many investors pause at these levels, but momentum is quite strong.

Constructive on the economy, skeptical on equity valuations. We don’t see a recession on the horizon given the current level of economic activity and fiscal support globally. Our main concern in the near term is whether valuations can be sustained. Importantly, there is a wide chasm between valuations of U.S. large cap stocks versus all the rest (e.g., small caps, non-U.S., emerging markets), most of which remain fairly valued.

Inflation risk. There doesn’t seem to be an end to government deficit spending on the horizon; we expect inflation may persist at levels above those desired by the Fed. As a result, investors may feel the squeeze between low or even negative real returns in fixed income and the alternative of investing in highly priced equities, where further upside potential may be difficult to imagine.

In this month’s Market Review & Outlook, our team looks back at the key factors contributing to second quarter economic and market performance. Looking ahead, a “cooling, not cratering” economy improves the outlook for equity outlook, though with upside risks to inflation and downside risks to growth. Below is a summary.

Private placement life insurance (PPLI) can be a powerful tool for ultra-high net worth (UHNW) individuals. It can help to optimize their investment portfolios, protect assets, and enhance estate planning strategies. In this brief primer, we highlight the key features of PPLI.