We wanted to reach out to you today to delve into our security selection process. An overview of each of our four gears of our investment approach is available below.
The markets recently witnessed the rebirth of higher volatility across all asset classes. Though we grapple with positive and negative economic factors, we feel the positives generally outweigh the negatives.
Bullish Positive Factors:
First, it is our opinion that we are closer to a bottom in oil prices. Ultimately, we feel this is bullish for midstream energy companies.
Second, we feel we are nearer to the bottom in interest rate movements and that we should be closer to a more upward trajectory, albeit at a lower slope.
Third, we see company earnings coming in at consensus or slightly beating estimates; admittedly excluding energy.
Bearish Negative Factors:
One bearish factor weighing on the market is China.
A second bearish factor is the political cycle with the current race to the White House.
Higher volatility as a whole does not discourage our idea generation, but it does affect our reevaluation and rebalance gear, which is more difficult when markets are unstable. We will make the tough moves to reposition our client portfolios for longer-term opportunities as short-term dislocations arise. The most difficult thing to do is buy when the markets are down and sell when the markets are up.
You can learn more about our investment approach here. If you have any questions on this topic or in your account(s), please do not hesitate to contact your advisor.
Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed. This presentation may contain forward looking statements and projections. There are no guarantees that these results will be achieved. It is our goal to help investors by identifying changing market conditions, however, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the economy or the stock market.
Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against a loss.
Published: January 2016
The U.S. has been in an economic expansion for the past six years and could continue for another year.
Historically, 90% of the time, an expansion continues into the seventh year.
The stock market started the New Year creating concerns and fears for many as we saw a drop in oil prices and the Chinese stock market continued to fall. This is an important time for us to advise our clients by bringing to their attention the long-term perspective beyond that of the short-term. Looking at cycles and the bigger picture, we think the outlook for 2016 is headed uphill and we will see more volatility than in previous years.
The chart below illustrates the analysis, done by Goldman Sachs, by showing the probability of economic expansion.
The historical record suggests that age has little bearing on the prospects of a downturn.
In the same way that one can derive lifespan probabilities from an actuarial table, we calculate the probability that our current six-year-old economic expansion enters its seventh year at about 90%. Indeed, there is a 60% probability that our current cycle may avoid recession for another four years– maturing into a 10 year cycle.
Source: Goldman Sachs Global Investment Research and GSAM
There are no guarantees that these results will be achieved. It is our goal to help investors by identifying changing market conditions, however, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the economy or the stock market.
Annual Market Review for 2015
Volatility may best describe the equities markets for the majority of 2015, as they were impacted by economic stress in China and Greece, coupled with underwhelming corporate earnings reports, falling oil prices, and terrorist attacks here and abroad. While some economic sectors, such as housing and labor, offered favorable news, others, including exports and wages, showed little in the way of positive movement. Nevertheless, despite inflation running below the Fed’s target rate of 2.0%, there were enough signs of overall economic growth to prompt the Federal Open Market Committee to raise interest rates in December for the first time since 2006.
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