World economic activity is slow, equity markets are extremely volatile and my overall outlook is cautious. The dollar continues to rise and China and Emerging Markets are experiencing extremely slow growth and significant capital outflows, making it very difficult for the world economy to gain any momentum. Yesterday, the Baltic Dry Index (BDI) just hit an all-time low of 290. The BDI is an economic indicator of overall world trade. It has dropped from a 52- week high of 1222 on August 5, 2015 to today’s unprecedented 290 reading. This needs to start moving up consistently for world economic conditions improve.
The U.S. Economy is relatively stable; and while our economy has proven to be flexible and resilient, there is growing concern that economic conditions in the rest of the world will eventually affect the U.S. economy. There is also a significant amount of geopolitical uncertainty around the globe that adds to investor concerns.
Going forward, we still like equities as part of a balanced portfolio. We are focusing on mostly large-cap, U.S.-centric, defensive oriented stocks high of the financial quality spectrum. We like consumer staples, healthcare and defense sectors. We also recommend a higher weighting of bonds and cash in the portfolio.