Summary of our thoughts at the end of the 3rd quarter of 2017


Lofty stock market valuations and the duration of the aging
bull market are stoking fears of an imminent correction.
However, the backdrop for the stock market currently
remains constructive.

The timing or magnitude of an impending correction are
never known. However, bull markets usually end due to
overly tightening monetary policy or external shocks – not
simply due to rich equity valuations.

In the meantime, continuing corporate earnings growth, low
global bond yields, low inflation and low volatility in both
the stock and bond markets remain.

At the same time, the economy has shown recent strength
and business spending has accelerated. Fiscal stimulus and
the long-term implications of post-hurricane rebuilding may
also serve to enhance the nine-year economic expansion.

While the stock market is likely due for an increase in
volatility off historically low levels, we would view any
near-term declines as a correction rather than the beginning
of a bear market. True bear markets are accompanied by
prolonged economic contractions which do not appear

While the Fed continues on its normalization path, the
current monetary environment is still very accommodative.
In a world of moderate economic growth, we believe 3%
short-term interest rates would be a level that would hinder
the economy and serve to derail stocks. It would not appear
the Fed will reach that level any time soon.

To be sure, real challenges exist and there are clouds on
the horizon. If not ultimately addressed, clouds created by
unprecedented government intervention can become ominous
and ultimately destructive. In the near term, however, we
believe investors will remain fixed on the rays of sunshine.

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