Dear Client,

As you are aware, the global equity markets continued to sell off today. As the U.S. markets close this afternoon, we would like to take this opportunity to point out the following:

  •          We believe the recent, sharp decline in global markets is primarily a function of concerns about China’s slowing economy. Deteriorating indicators of industrial activity, the devaluation of the Yuan, and efforts to hold up the local equity market have shaken investors’ confidence in China. Other Emerging Markets are facing pressures from weaker commodity markets, capital outflows, and the related decline in their currencies. Economic prospects in the U.S., Europe, and Japan appear relatively stable, but turmoil in Emerging Markets will likely have global repercussions.


  •       We are carefully monitoring the situation and are particularly mindful of risks from a potential hard landing in China. Monetary policy in China looks excessively restrictive, and we expect policymakers to respond with significant stimulus. In the Developed Markets, we think recoveries are likely to persist, and monetary policy should remain supportive of financial markets.


  •        International equities appear attractively valued, considering our outlook for high-single-digit profit growth over the next few years. Our International portfolios are benefitting from an underweight of commodities, which are subject to weaker demand as China’s economy shifts from infrastructure development to consumption and services. However, we do have exposure to Developed Market companies with substantial businesses in Emerging Markets-and to a lesser extent to companies headquartered in Emerging Markets.


  •         In our view, the U.S. recovery remains intact as housing strengthens and employment gains are on track. To some degree, the U.S. consumer is insulated from slowing emerging market demand yet benefits from the falling commodity prices, especially oil. Our U.S. portfolios also remain underweight commodity-oriented companies, instead focusing on companies with strong end market demand, both here in the U.S. and abroad.


  •        In light of current turbulent markets, we are reevaluating all holdings and looking for new opportunities, given updated fundamentals and prices. We continue to focus on creating diversified portfolios of high-quality companies with a three-to-five year investment horizon.