Weekly Market RecapThis week saw the Federal Reserve hold rates steady, seeing a slightly improved and generally positive picture for the US economy noting "Near-term risks to the economic outlook have diminished". Many countries shared estimates of second quarter (April-May) GDP growth this week. The first estimates for US GDP for the second quarter of 2016 at 1.2% growth year-on-year, this is a similar rate of growth to the first quarter, but below what many expected. In the European Union, GDP growth of 1.6% year-on-year was also broadly consistent with the prior quarter. UK GDP was strong for the second quarter at 2.2% year-over-year, however did slow meaningfully in the month of May as the EU referendum drew closer at the end of May. Overall, it appears that developed economies continue to grow at a solid, if unspectacular, pace. Various markets in the US, including the S&P 500 and Dow Jones indices, have made new all-time highs this month. Though this can be encouraging for investors, it may actually matter less than you think. If you're more pessimistic or contrarian in nature and concerned that a new high may mean the markets are set for a fall, remember that historically the S&P 500 has actually performed slightly better in the 12 months after making a new high than during other periods. A new high isn't necessarily a permanent peak for the markets. For example, in the 1980-2000 period, the US market saw a series of increasing new highs over a span of two decades. Additionally, historically, approximately 40% of investor returns in US stocks have come from dividends. Thus, we should remember that price changes are important for returns but so too are the slow and steady accumulation of dividends, if history is any guide. Furthermore, academic research suggests that stock market valuation can be helpful in predicting longer term stock returns, but in our view, the presence or absence of new highs has less meaning for markets. Most major stock markets, with the exception of the US, are not above highs of 2015 at this point. So although there is focus on the US market, other markets and asset classes are at different points in their economic cycle, as is often the case across the global economy. All of which is to say that we see no reason to change course. Just as when the markets appeared concerned about Chinese growth last summer, commodity weakness this February, or Brexit just last month, and now the US markets up on what appears to be improving employment and benign inflation, we have conviction that our recommended investment portfolio remains robust for the longer term, whatever the future should bring. Notes: Disclaimer: Your Portfolio Update
Over the past month your portfolio was up 3.6%, and we have no recommendations at this time to improve it. Congratulations on maintaining one of the best portfolios among all our clients. We will, as always, continue monitoring your account and alerting you if there are actions to take (periodic rebalancing is required, etc). Ways To Improve Your Portfolio
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Saturday, July 30, 2016
Your portfolio up 3.6% over the last 30 days as US grows 1.2% in Q2
Saturday, July 23, 2016
Your portfolio up 6.1% over the last 30 days as IMF trims forecasts on Brexit
Weekly Market RecapThis week saw the International Monetary Fund (IMF) nudge down global GDP growth estimates for 2016 to 3.1% from 3.2%. This forecast change by the IMF is primarily a reaction to Brexit, with the UK expected to see lower, but still positive growth for 2016-17 with small, but negative impacts on trading partners. On the positive side, the emerging markets of Brazil and Russia are expected to have a more positive 2016 than originally projected. We encourage you to take some time to consider your risk tolerance setting. This is useful to do at least annually, unrelated to market events. To help with this, it can be helpful to think back to how you felt as an investor on Friday, June 24th, after the Dow fell 610 points on Brexit fears. Was your view that these types of market movements can happen regularly, and tend to come with investing in portfolio that contains equities? Or did the large movement make you nervous to the point you considered changing your allocation? Also, bear in mind that the Brexit pullback last month was relatively short-lived and shallow. Historically longer and deeper corrections have occurred. Self-reflection on how you react to market events can help correctly identify your true risk tolerance, and consequently, be better prepared when future world events occur that rattle the financial markets. Your risk tolerance should be set for the long term. The right answer for your risk tolerance depends on your own ability to manage the expected trade-off between greater ups and downs in the market in exchange for potentially higher returns. Please remember that our algorithms already take into account your age and time to retirement in personalizing your portfolio. This means that your risk tolerance should not necessarily be aggressive if you are younger or conservative when you are older. Considerations of your age is already included in your personalized portfolio allocation through what is often called a glide path that changes your allocation as retirement draws closer. If in doubt, select a lower risk tolerance, because having a strategy that you can truly stick with is critical for investment success, in our view. Also, remember that adjusting your risk tolerance is likely to result in trades for your portfolio, which can have both a direct cost and tax implications. Notes: Disclaimer: Your Portfolio Update
Over the past month your portfolio was up 6.1%, and we have no recommendations at this time to improve it. Congratulations on maintaining one of the best portfolios among all our clients. We will, as always, continue monitoring your account and alerting you if there are actions to take (periodic rebalancing is required, etc). Ways To Improve Your Portfolio
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Saturday, July 16, 2016
Your Weekly Update - US Hits New Highs
Weekly Market RecapThis week saw the S&P 500 and Dow Jones indices make new all-time highs in a show of strength for US markets. This is the first new high in 15 months for the S&P 500 and marks a sharp rebound from the Brexit concerns that we saw just 3 weeks ago. This serves as a reminder on the potential risks associated with market timing, since many global markets have apparently quickly reversed any Brexit related pessimism. In Japanese elections the incumbent, Liberal Democratic Party-led coalition won a sweeping majority. The gives Prime Minister Shinzo Abe a renewed mandate for his "Abenomics" reforms to boost growth in Japan that have been a focus since 2012. Japan is the world's third largest economy, and has seen sluggish economic growth in recent years. Japanese GDP growth for the first quarter of this year was more positive than expected, though recent data shows Japan continues to experience deflation. In the UK Theresa May was named Prime Minister, replacing David Cameron, who announced his resignation after the Brexit result. In the, EU Industrial Production for May was weak, and in China trade volumes fell in June. The Bank of Canada and Bank of England both held interest rates constant at meetings this week. The Bank of England noted that, "economic activity [in the UK] is likely to weaken in the near term." They also stated that they, "expect monetary policy to be loosened in August". Notes: Disclaimer: Your Portfolio Summary
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Saturday, July 9, 2016
Your Weekly Update - US Job Growth Rebounds In June
Weekly Market RecapThis week the Federal Reserve (Fed) released the minutes from their June meeting. In the Fed's assessment, the US economy appeared to have "picked up" and was on track to grow at a faster rate in the second quarter of 2016 than the first. While growth in US employment appeared to have slowed (as of June 15), in the Fed's view, the gradual recovery in housing appeared to be continuing. Business investment was flat and inflation was below the Fed's 2% long-term target. Overall, the Fed's economic assessment remains "data dependent" but it does expect a "gradual" increase in interest rates. The Fed's concerns about slowing US job growth may be eased by this Friday's strong job report. Internationally, Chinese and European Union PMI (Purchasing Managers' Index) survey data implied improvement for June, and producer prices in the European Union rose at the sharpest rate since August 2012. However, survey data for the UK in June implied softness, even before the outcome of the EU Referendum was known later in the month. Notes: Disclaimer: Your Portfolio Summary
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Saturday, July 2, 2016
Your Weekly Update - UK Credit Rating Downgraded
Weekly Market RecapIssues related to the UK's expected exit from the European Union continued to make headlines this week. The UK saw its sovereign credit rating downgraded by S&P from 'AAA' to 'AA' citing a "less predictable, stable, and effective policy framework in the UK". The UK has not, at this point, triggered Article 50. Article 50 would mark the formal start of the process of the UK's departure from the European Union. In the US this week, Q1 economic growth was revised upward to 1.1% growth over the prior quarter, and consumer confidence for June made its highest reading of the year so far. US house prices showed modest growth, according to the Case-Shiller Index. The recent moves in the market around the recent Brexit news demonstrate how asset class diversification can be valuable to portfolios. During periods of stock market weakness around the Brexit announcement, higher quality fixed income assets, such as government debt, generally rose in value. Though this relationship is not universal, it has frequently been the case historically, that rises in bonds can moderate declines in stocks at times of economic uncertainty. Therefore, bond exposure can be helpful in smoothing portfolio returns. Notes: Disclaimer: Your Portfolio Summary
Ways To Improve Your Portfolio
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