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Overall, we believe the slow response of wages to unemployment reflects structural as much as cyclical issues. Wage growth should accelerate somewhat in the months ahead and that, along with relatively healthy domestic economic data, should prompt the Fed to finally raise rates. How might the equity market respond? Stocks have historically been volatile around the time of Fed liftoff. However, over the subsequent months markets have digested the better economic data and moved higher. Consequently, we believe that long-term investors should remain marginally overweight equities within the context of a balanced portfolio.
The prices of equity securities are sensitive to a wide range of factors, from economic to company-specific news, and can fluctuate rapidly and unpredictably, causing an investment to decrease in value.