On February 2nd the Dow Jones Industrial Average dropped −2.54%—its largest percentage decline since the Brexit referendum in 2016— while the S&P 500 Index dropped −2.11% and the MSCI World Ind
Throughout this economic recovery and bull market, we have spoken many times about the relative attractiveness of equities. A year ago, we wrote about the four pillars of “Trumponomics”— taxation, repatriation, deregulation and infrastructure— and suggested that the year ahead could be a positive one for equity markets.
As value investors in the Benjamin Graham tradition, we believe that the most serious investment risk is permanent impairment of capital and that the leading source of this risk is overpaying for securities.
In the fixed-income market, the dominant theme was, once again, complacency in the face of risk. Spreads were already generally low at the end of the third quarter, and the market ground even tighter in the fourth.
High yield issuance rebounded in 2017, following weakness in 2016 that resulted from the travails of the energy and commodities sectors. At the close of the fourth quarter, high-yield issuance was still driven largely by refinancing activity—a positive trend from a credit perspective.
First Eagle Funds
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PO Box 219324
Kansas City, MO 64121-9324