Q3 Investment Committee Briefing

blog_investment_committeeThis is the first in a two-part blog of our Quarterly Investment Committee Briefing.
 
So far this year, one of the big stories in global markets was the surprise Brexit vote in the third week of June. Conventional wisdom was that this event was a harbinger of future economic weakness and lower markets. Markets fell a bit on the news; however, as so often happens with conventional wisdom, it was quickly cast aside. By the start of Q3, the S&P 500 had almost recovered to its 2016 high levels. In the weeks that followed, the S&P 500 and several other major stock indexes crept higher… until August 15 when they broke through to an all-time record high level. Continue reading

No One Knows What Will Happen with Brexit… But Long-Term Investors Probably Shouldn’t Worry Too Much

This blog is from the July issue of Portfolio Perspectives.
 
Unlike fans of horror movies, markets hate scary surprises.
 
On June 22, many markets, even betting parlors, were predicting that British voters would opt to stay in the European Union (the odds went as high as 80% for staying). On June 23, gamblers and markets were proven wrong and stocks fell precipitously around the world, plunging more than 5% in the U.S. in just two days.
 
Some of the doomsayers from January, when the S&P 500 Index sank more than 10% and then rebounded to positive territory again by the end of Q1, came out of the woodwork to predict new Brexit-related disasters. Even European Council President Donald Tusk said, “I fear that Brexit could be the beginning of the destruction of not only the EU but also of western political civilization in its entirety.” Continue reading

Is Your Glass Half Empty or Half Full?

Two glasses, both half-full of green liquid.
“It is absolutely impossible for a client with a fundamental fear of the future to become a successful investor, or even to formulate a rational long-term financial plan.” (Nick Murray)
 
How do you think your clients feel when they leave your office or get off the phone with you — optimistic or pessimistic?
 
The answer may lie in how you define your investment process for clients (and embrace a wider wealth management process as well). Continue reading

It’s About Time

Source: Morningstar Direct 2016. 65/35 Index Mix:  2% Cash, 16% ST US Fixed Income, 17% Global Bonds, 15% US Large, 12% US Value, 8% US Small, 4% US REITs, 14% Intl Large Value, 7% Intl Small, 5% Emerging Markets Value; rebalanced monthly. Index representation as follows: U.S. Large Cap (S&P 500 Index), U.S. Value Stocks (Russell 1000 Value Index), U.S. Small Company Stocks (Russell 2000 Index), U.S. Real Estate Market (Dow Jones U.S. Select REIT Index), International Developed Value (MSCI World Ex USA Value Index (net div.)), International Small (MSCI World Ex USA Small (net div.)), Emerging Markets (MSCI Emerging Markets Index (net div)), Global Bonds (Citi WGBI  1-5Yr Hdg USD), US Bonds (BofA ML Corp & Govt 1-3 Yr TR).   Past performance is not a guarantee of future results. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio. Treasury notes are guaranteed as to repayment of principal and interest by the U.S. government. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting. Fixed income investments are subject to interest rate and credit risk. Emerging markets involve additional risks, including, but not limited to, currency fluctuation, political instability, foreign taxes, and different methods of accounting and financial reporting. Real estate securities funds are subject to changes in economic conditions, credit risk and interest rate fluctuations. All investments involve risk, including the loss of principal and cannot be guaranteed against loss by a bank, custodian, or any other financial institution. Diversification neither assures a profit nor guarantees against loss in a declining market. The risks associated with investing in stocks and overweighting small company and value stocks potentially include increased volatility (up and down movement in the value of your assets) and loss of principal.

Source: Morningstar Direct 2016. 65/35 Index Mix: 2% Cash, 16% ST US Fixed Income, 17% Global Bonds, 15% US Large, 12% US Value, 8% US Small, 4% US REITs, 14% Intl Large Value, 7% Intl Small, 5% Emerging Markets Value; rebalanced monthly. Index representation as follows: U.S. Large Cap (S&P 500 Index), U.S. Value Stocks (Russell 1000 Value Index), U.S. Small Company Stocks (Russell 2000 Index), U.S. Real Estate Market (Dow Jones U.S. Select REIT Index), International Developed Value (MSCI World Ex USA Value Index (net div.)), International Small (MSCI World Ex USA Small (net div.)), Emerging Markets (MSCI Emerging Markets Index (net div)), Global Bonds (Citi WGBI 1-5Yr Hdg USD), US Bonds (BofA ML Corp & Govt 1-3 Yr TR).
 
Past performance is not a guarantee of future results. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio. Treasury notes are guaranteed as to repayment of principal and interest by the U.S. government. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting. Fixed income investments are subject to interest rate and credit risk. Emerging markets involve additional risks, including, but not limited to, currency fluctuation, political instability, foreign taxes, and different methods of accounting and financial reporting. Real estate securities funds are subject to changes in economic conditions, credit risk and interest rate fluctuations. All investments involve risk, including the loss of principal and cannot be guaranteed against loss by a bank, custodian, or any other financial institution. Diversification neither assures a profit nor guarantees against loss in a declining market. The risks associated with investing in stocks and overweighting small company and value stocks potentially include increased volatility (up and down movement in the value of your assets) and loss of principal.

This article will be featured in the spring edition of our 360 Insights Quarterly Client Newsletter.
 
Whenever markets take a dip, it’s natural to question performance. Is my portfolio behaving differently than it should? Is this downturn worse than the last one? Is it different this time? Continue reading

Oops! Here We Go Again

When will investors (and many financial advisors) learn the potential perils of chasing returns?
 
Take a look at the chart below showing flows into bond funds from 2009 through 2012. Billions of dollars poured in, year after year.
 
Equity and Bond Flows 2004 – 2013
 
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Meanwhile, despite five-in-a-row positive years for U.S. equity markets, investors fled stocks until the bond market turned sour in 2013, with a 15.1% decline in 30-Year U.S. Treasuries.
Continue reading