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A long-term perspective is difficult to maintain through the roller coaster of the past 10 years. It is reasonable to wonder when we will revisit the much preferred bull market of the 1980s and 1990s. While we think world equity markets should earn positive real rates of return over the next five to 10 years, we are less certain there will be a multi-year, low-volatility run-up.

The European Central Bank’s new policy direction has helped reduce volatility to more normal levels for this phase of the business cycle. Lower volatility could eventually reduce equity risk premiums and allow for higher stock prices. In fact, it already has. Strong U.S. economic data, record corporate profits, and falling unemployment should help equities as well.

Credit Suisse believes that directional strategies will likely continue to add value toward the end of the year. On the other hand, while the short-term event risk of the coming weeks is expected to set a challenging environment for the majority of hedge funds, it should be supportive or at least not harmful for global macro managers.

There are many reasons to seek non-correlated investments, even if, like fastastical creatures, they are hard to find. These investments can be highly beneficial to sophisticated investment portfolios, as they provide a great deal of diversification for the dollar.

The extended slump in the U.S. housing market has created a significant opportunity for patient investors. Given the imbalance between prices (weak) and rents (strong), investors willing to participate in a buy-hold-lease strategy have the opportunity to garner attractive current income on stabilized net capitalization rates exceeding 6%, with the potential for significant capital appreciation as the housing market ultimately recovers.

With growth slowly returning to the First World but decelerating in several emerging countries, macroeconomic managers now face different local imperatives, and a divergence in policy response is emerging. The seeming lack of policy coordination sometimes looks disconcerting. However, we are inclined to believe the various financial policy settings will turn out to be consistent with continuing economic recovery for the global economy.

Since 2008, commodities have been highly correlated with equities and other risk assets. As a result, many investors have begun to question whether the diversification benefit of investing in commodities has evaporated. A new report, however, finds that the recent spike in correlation is very much in line with the historical pattern around large macroeconomic shocks.

The prudent investor will seek to capture as many of the opportunities as might be available but will be particularly careful to define his or her real risk tolerance and need for higher returns, hopefully through a cautious evaluation of his or her individual goals and the size of the assets needed to defease them. The spectrum of possible investment stances is large, but the main focus should be on ensuring that one is in the right position within this spectrum rather than being mesmerized with short-term return opportunities.

Modern portfolio theory, while highly useful in illustrating the relative tradeoffs between current and prospective portfolio allocations, should not be used as the primary framework for constructing portfolios for wealthy families. Investors are better served, the authors say, by a goals-based approach that recognizes multiple levels of risk tolerance for distinct goals.