April 27, 2016
The first quarter of 2016 was a tale of two halves, the first dominated by fear and the second by relief. The decline in oil prices to below $30 (USD) contributed to rising default concerns in any business remotely related to the energy industry, including banks. Some of the weakness in commodities was also attributed to the stronger U.S. dollar as the Federal Reserve (Fed) insinuated further interest rate increases.
We still do not believe that a recession is imminent in North America or that valuations are in market bubble territory, and we still favour equities over cash or bonds. Nonetheless, certain risks have increased.