INVESTING FOR THE NEXT MARKET REGIME

Managing Risk and Finding Opportunity in a Changing Market  

By Victor Sperandeo and Adam Watts

The current market regime, which has persisted since the end of the financial crisis, has sharply elevated stock and bond prices, and made winners of passive investment vehicles that seek to replicate these markets.  Active approaches, be they discretionary or systematic, largely depend on market turning points to demonstrate their relative effectiveness, and the current central bank-driven markets have lacked such turning points.

However, the election of Donald Trump combined with the likelihood of a December rate increase may signal an end to the current prolonged regime where markets are driven almost exclusively by monetary policy. If that turns out to be true, we believe stock and...