Endowment Management Report
The market value of the Endowment as of 06/29/16 is $15,014,328. This represents an increase of approximately $160,129 (+1.08%) during the 2nd calendar quarter of 2016. Over the last 6 months the portfolio is up approximately $282,000 (+1.91%). During the volatile month of June the portfolio is flat.
The uncertainty surrounding the Brexit vote will likely reduce global growth modestly. Pre-Brexit, the IMF estimated that global growth in 2016 would advance at a 3.2% pace in 2016. The uncertainty regarding the mechanics of Brexit and significant ongoing perceived risk to the EU structure will have economic costs, particularly in slowing business investment. We believe that 2016 global growth is more likely to be in the high 2%/3.0% range.
We estimate that U.S. GDP will gain 2.0-2.5% this year, rebounding from a slow start. We continue to believe that U.S. growth is sustained by labor market gains, an improved consumer (job & wage growth, credit access), and a demographically-enhanced housing market. We continue to believe that rising commodity prices, tight labor markets and low productivity growth will bring urgency to the Fed’s need to “normalize” interest rates. However, the Brexit-related turmoil will give the Fed additional reason to move slowly. We judge one more rate hike this year as completely plausible, predicated on our belief that the weak first quarter U.S. GDP report is not representative of full year 2016 growth.
Given our belief that the markets underestimate the propensity for the Fed to hike short-term rates, we find little value in bonds. However, low and negative rates abroad reduce the downside risk. We believe that monetary stimulus has diminishing returns in general, and negative interest rate policies risk unintended consequences that may actually impede growth. We will be watching for signs that negative interest rate policies may offset or impede the benefits of asset purchase programs and regulatory reform. In the wake of Brexit, central bank policy will place a focus on liquidity provision through asset purchases. The BOJ will likely work to restrain the strength of the yen.
We are modest bulls. We see earnings growth getting a boost from three factors:
We believe that oil prices today anticipate a state of equilibrium, and consequently
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