As we look to the second half of the year, global growth has become somewhat asynchronous. Europe is decelerating, while emerging markets, particularly Latin America, are struggling with a strong US dollar. As to China, the trajectory of its growth is debatable.
In the geopolitical sphere, we saw further departures from democratic traditions and a continuing drift toward “strongman” politics in several countries. The leading candidate in Brazil’s upcoming election is currently in jail. Turkey’s president assumed new powers. And as we noted in the first quarter, China’s president removed his own term limits.
As we have said in the past, our approach is to reduce our exposure to risks for which we are not being adequately compensated. Our defense against credit risk is to emphasize investments of relatively higher credit quality. Although we cannot entirely avoid duration risk, we can potentially minimize the risk by buying shorter maturity paper.
We invite you to join us as our Portfolio Managers sit down and discuss today’s investment environment.
We live in interesting times. Over the past decade, we have witnessed the global financial system on the precipice of collapse, monetary interventions that are unprecedented in modern times, the European community on the brink of disintegration, and populist uprisings that would have been unimaginable as recently as five years ago.