Global equity markets continued their 2019 advance in the second quarter with the MSCI ACWI ex USA Index rising 2.98%, but May witnessed the first material market drawdown of the year, triggered by renewed trade friction between the U.S. and China and related concerns about global growth.
Given our skeptical view on the Fed and its motives, the duration of the portfolio has remained constant through much of the second quarter as we have focused more on diversifying the portfolio to weather many economic outcomes.
The municipal bond market is changing. Investors just haven’t realized it yet. In our minds it has led to a mispricing of risk broadly. As such, we are running portfolios more conservatively. Mindful of the fact that when price and fundamental value diverge, there tends to be a reckoning.