By Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer
Marchello Holditch, CFA, Vice-President, CI Multi-Asset Management
Over the first quarter of 2019, global economies continued to slow, Brexit and U.S.-China trade remained uncertain, but the key theme was the pivot in U.S. Federal Reserve policy. Expectations went from rate hike to rate cut within a month, one of the most dramatic changes in the Fed’s history, and all asset classes rallied during the first quarter as a result. While corporate earnings are expected to decline, equity price-earnings ratios, which are a measure of investors’ willingness to pay for future earnings, has increased to support this rally. In fixed income, even though central bank rates have not yet changed course, the markets are pricing for rate cuts soon. Investors are buying bonds to lock in current rates, assuming that future rates will be lower.