International Equities At (Or Near) An Inflection Point

Central Bank Policies

In the U.S., the Federal Reserve has embarked upon a gradual and extended period of tightening that will continue to involve some combination of interest rate hikes and balance sheet reductions. With respect to interest rate hikes, as it stands now, we believe that the Fed will likely raise the Federal Funds Target Rate one more time this year and three additional times in 2019 as they address potential mounting inflationary concerns. This stands in contrast to many other central banks across the globe who will likely continue to pursue their own accommodative monetary policies by either maintaining current interest rate levels or perhaps even cutting their respective interest rates. This type of accommodative environment often helps to spur economic growth, which historically has been beneficial to upside stock price potential.

With these driving factors understood, there are still many potential risks and uncertainties as it relates to international equities that may continue to provide volatility-inducing headwinds. These risks and uncertainties include, but are not limited to, on-going trade agreement tensions (Ex. U.S. and China), unrest in certain Emerging Market countries (such as Turkey and Venezuela) and fluctuating currency exchange rates. Despite these uncertainties, we see attractive investment opportunities for international equities looking ahead. While we could certainly also make a bullish case for U.S. equities over the short-intermediate term, selectively including international equities with U.S. equities in a global equities portfolio strategy, where appropriate, seems worthy of consideration.

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Disclosure: Hennion & Walsh Asset Management currently has allocations within its managed money program and Hennion & Walsh currently has allocations within certain SmartTrust® Unit ...

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