Risk assets advanced further during the last month, amid a relatively quiet fundamental backdrop. A strong July U.S. payroll report, following an even stronger June reading, helped quell concerns over the pace of recovery in the world’s largest economy.

It appears that, once again, the Federal Reserve’s hopes to raise interest rates are being stymied by the economy. Just last month the Fed’s minutes showed a predisposition to raise rates soon, and Chair Janet Yellen said it would probably raise rates “in coming months” should the data continue to meet expectations.

Something’s gotta give. The global growth environment remains subpar — stable but at a disappointingly sluggish pace. Central bankers, where possible, continue to ease policy, but the financial market reaction is increasingly unpredictable. In this environment, the predominant theme this year has been a bounce back in the most beaten-down assets — including commodities and emerging markets.

The renewed appetite for risk assets continued during the last month, maintaining the strong rally after global equities registered a 20% decline from their highs on February 11. After triggering risk aversion in January, the news out of China is beginning to show some positive effects from their multi-pronged policy approach. The markets have also been supported by more realistic utterances from the Federal Reserve. Not only has the full committee reduced their expectations closer to the market, Fed Chair Janet Yellen has gained some ground in convincing investors that she's in control of policy making at the Fed.

Are we experiencing a healthy correction or something more? After a long-period of relative calm, risk assets sold off meaningfully in response to global growth concerns. Our Chief Investment Strategist analyzes the fundamental picture in the wake of the recent downturn and what investors should do now.

Commodities investors face numerous short-term challenges – falling demand, falling prices and a strong dollar – but this may present long-term opportunities for patient investors. Our Chief Investment Strategist, Jim McDonald, explains in his latest Investment Strategy Commentary: Commodities – A Crude Awakening.

Last month we said that the odds favored some sort of “kick the can down the road” agreement between Greece and its creditors, and it looks like that may be coming to pass. While there’s still much work to be done, the tone of the current agreement seems focused on avoiding a euro exit and debt write-downs, while ignoring growth-oriented policies. With the hard decisions yet again put off for another day, this should be euro-weakening, all else equal.

While we expect U.S. growth to see some improvement from the slow start to the year, we think optimists are likely to be disappointed at the overall pace of growth. The U.S. economy has averaged 2.2% growth since the financial crisis, and we don't see a material acceleration during the near-to-intermediate term. The prospect of a pending increase in the Fed funds rate has contributed to a rise in interest rates and strengthening of the dollar, both of which serve as a constraint on growth. We also don't see much upside to the U.S. economy through materially better growth outside the U.S.

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The U.S. dollar has seen strong upward moves in the past 9 months. What would continued dollar strength mean for economic growth, earnings and asset class performance? Find out more in Jim McDonald's latest strategy piece.

Investors have faced a torrent of central bank actions and communications during the last month, and markets continue to differentiate among economies and companies a welcome maturation from the markets? prior regime of ?risk on/risk off.? We believe the Federal Reserve has moved from an easing bias to one of tightening but at an elongated pace that will remain data dependent. Joining in this parsimony are some key emerging-market central banks, including the People?s Bank of China, which is working to control credit risk in the Chinese economy.

Investors and advisors are growing increasingly concerned about investing in bonds. Historical levels of flows into the asset class have driven prices up significantly. The extended economic downturn continues to apply pressures to municipalities and states are struggling with their balance sheets. Despite these headwinds investment professionals maintain that municipal bonds should continue to play a role in client portfolios. We thank Northern Trust Investments for their sponsorship.