Trends Watch: March 8, 2018

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.  

This week, Elana talks to John Anagnos, CIO, Aetolia Capital.

What is your outlook for alternatives?

I believe alternatives will play a major role in an investment portfolio going forward, as we see weakness in fixed income in a rising rate environment. The problem I have seen is that there are many alternative investments that don’t perform as they are portrayed. Accredited investors have a better selection of alternatives (PE, VC) that non-accredited investors cannot access. Investors should also be cautious of the fees and performance incentives applied.

What is your outlook for the economy?

We are continuing our economic expansion and I foresee a low probability of a recession. Corporate earnings growth is strong. The recent tax cuts are an added catalyst to our economy. The only real headwinds I see are interest rates rising too quickly, and I am not as fearful of inflation as many pundits portray themselves to be. The tax cuts are front-loaded, so we will see a good year in 2018 (not like 2017), and another is likely in 2019. I am cautious of a late-2019 or 2020 hike in the probability of a recession. If we look even farther out, I think the latest additions to our overall debt could be a big factor if the results are not achieved that are needed for the recent tax cuts to be a success.

What keeps you up at night?

I guess the only thing that keeps me up at night, is what I don’t see coming. Some obvious factors are geopolitical risk (North Korea), terrorism, and maybe a banking crisis in China that would slow global GDP. What has been shocking is how resilient our markets have become to negative news.