Market-View 1st Quarter 2014

Portfolio Recap As the 1st quarter of 2014 came to a close and the 2nd quarter began, the US stock market remained near record highs.  Talk by the Federal Reserve of ending (tapering) their quantitative easing program sooner, questions around whether corporate earnings can support valuations and recent geopolitical events in the Ukraine, all contributed to increased volatility and concerns over how much longer the current 6 year bull market will continue.  Through all of this, your portfolios showed resiliency and experienced steady, positive performance. Our diversified approach to managing investments continued to focus on limiting downside equity risk through a bias for value-oriented, dividend paying domestic and international equities.  In the short term, volatility and potential for loss has been further mitigated by allocating fewer investment dollars to small cap and emerging international, both of which carry more risk than other areas in the equity markets.  Small cap has also experienced significant gains over the past several years further motivating a reduction because we believe the prospect for significant future appreciation has diminished.  Hybrid investments, led by preferred stock, Read on! →

Speed Bumps Ahead?

The first six weeks of 2014 have been nothing to cheer about in terms of market performance, with the major indices down anywhere from 5-7% (although they have bounced back with S&P500 Index down only 0.75% YTD) and questions popping up about economic growth. Of course, the question investors are likely asking is whether we are at the start of a longer-term downtrend or merely a speed bump in the road. The best way to approach this question is to think about what areas of the economy are unlikely to be very affected by an economic slowdown. Traditionally, when it appears the market is in for a sustainable downtrend and economic growth is slowing or reversing, areas of the market known as the defensive sectors have held up better than those known as cyclicals. Sectors such as utilities (people always need power), health care (people get sick in any economic environment), and consumer staples (the need for toilet paper stays relatively constant), have been considered defensive. Interestingly, thus far in this pullback, only the utilities and health care sectors have Read on! →

MARKET-VIEW 4TH QUARTER 2013 – January 2014 Newsletter

After a great year for the equity market in 2013, investors are looking to 2014 and wondering what to expect in the year ahead.  The economy appears to be gaining momentum as we head into 2014 and may soon enter “escape velocity” – meaning our recovery moves into expansion and does not require excess monetary stimulus (no quantitative easing) which could bring the expectations of tighter monetary policy into investors’ minds.  A secular bull market is likely intact but the risk of a 5-10% correction this year is elevated. These gains came in the face of ongoing macro challenges, illustrating again that stocks often like to climb a “wall of worry”.  The past year started with a government crisis and an agreement regarding the fiscal cliff.  Throughout the following months we saw political problems in Europe, an international crisis in Syria, another US government shutdown, a botched rollout of the Affordable Care Act and the word “taper” entering our investment lexicon.  Stocks kept powering higher however, with only brief pauses along the way. This bull market is now the 6th Read on! →

December Market Perspective

As the U.S. stock market moves towards its 5th anniversary off the March 2009 bottom and we break all-time highs seemingly every week, I wanted to share some of my thoughts.  Using S&P500 Index historical total return data1 there have been 12 bull markets since the 1930’s.  The industry standard definition of a bull market is a gain of 20% off its low over a period of at least 6 months. Today’s bull market is in its 57th month which puts it close to average from a historical perspective.  Its total return from the 2009 low to today is 167%.  This is close to the average bull market gain of 185% since the 1930’s. However, the rate of gain per month is 2.9% which ranks it 3rd best since the 1950’s.  The only faster pace has been the bull market leading up to the ’87 Crash and the tech driven bull market of the late 90’s which ended with the crash in 2000. With low-moderate U.S. growth, low inflation, low (but rising) relative interest rates, improving housing market, lower Read on! →

MARKET-VIEW 3RD QUARTER 2013 – October 2013 Newsletter

While fears over Federal Reserve (the Fed) tapering and some uneven economic data hurt stocks earlier in the quarter, September was a surprisingly strong month for equities. The Fed’s decision to keep its quantitative easing program going, combined with moderating tensions in Syria, helped stocks to easily outperform bonds for the third quarter.  Three other market themes emerged during 3rd Quarter 2013:  cyclical stocks outperformed defensive stocks, the equity market rally widened its focus to include international stocks and emerging markets, and corporate and municipal bonds outperformed Treasuries.  Despite a mediocre jobs market, retailers and other consumer discretionary stocks continued to outperform. US Economic Outlook As we enter the fourth quarter, the debate over funding for the federal government and the need to increase the debt ceiling are leading to risks in US credibility on the fiscal front.  Just two years after Congress led America to a fiscal cliff that prompted Standard & Poor to downgrade the United States’ long-term credit rating; we now appear poised to repeat the same fiasco. Despite the political dysfunction in Washington, the private sector Read on! →