Bayou City Capital returned +1.55% during August after fees and expenses, raising 2017 performance to +11.02%. The S&p 500 displayed a few signs of stress, illustrated by the volatile behavior of the VIX during the month. Markets also displayed demand for 'safe haven' assets, as government T-Bills and gold prices reached multi-month highs. The devastation from Harvey and Irma will filter through U.S. GDP growth forecasts, incurring a downward revision. Lastly, the stock market has shown that good news has been priced in, evident from the most lukewarm stock price reaction towards positive corporate earnings since Q2'11 (see chart below). These are all signs that the 2017 rally may take a pause here in the short-term.
All that being said, tax reform is still an oasis on the horizon that encourages market appreciation. As the political process unfolds at its typical gradual pace, the market may enter a wait-and-see pattern in the coming months. Bayou City Capital will maintain its performance targets with a goal to finish the year on a positive not.
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