2nd Quarter 2017 Capital Market Review

Q2-2017 Quaterly Market ReviewThe 2nd quarter of 2017 continued the streak of new highs in equity markets.  While this bull market has already lasted longer than most; investors still seem to be overly cautious, expecting a pullback at any moment.  However, this nervousness is likely the reason the pullback has not happened. The longer the nervousness continues, the longer the market can run.  Aiding the uptrend continues to be improving corporate earnings, low unemployment, low interest rates, low inflation, and a much improved consumer balance sheet. Continue reading

1st Quarter 2017 Capital Market Review

While capMarket Reviewital markets experienced some volatility during the first quarter of 2017, it
was significantly tamer than the tumultuous first quarter of the same time last year. The stabilization of oil prices and the consistent signs of economic stability, globally, set the backdrop for positive gains in the first quarter.

The political climate in the US, as well as the globally, seems to be the biggest driver of market expectations. Central banks around the globe have begun to take a back seat to policy makers and increasingly nationalistic agendas. Continue reading

Q4 2016 Capital Markets Review

2016 Q4 Capital Market ReturnsThe 4th quarter of 2016 was another remarkable quarter. For the second time in 2016, the market was upended by an unexpected election result. In the biggest surprise since the Brexit vote, Donald Trump was elected President of the United States. The market reaction was as strong as it was unexpected. Large U.S. companies (S&P 500 index) rose 3.82% for the quarter, while small companies (Russell 2000 index) appreciated 8.83%. The bond market was equally shaken with the BBgBarc US Aggregate Bond index down -2.98% and conversely the yield on the 10-year treasury increased from 1.61% to 2.45% during the quarter. Outside the U.S. saw a different reaction with foreign developed markets (MSCI EAFE index) down -0.71% and emerging markets (MSCI EM index) down -4.16% for the quarter. Continue reading

3 Things to Know About Using Fixed Income Indexes to Gauge Performance

Why indexes are importantRecently, we published an article on the differences in Equity Indexes. While surprising how different some of these Equity Indexes can be (and by extension the Index Funds that follow them), the Fixed Income Indexes are a completely different universe. If the Equity Index and the Index Fund do not match, there will be differences in performance.  However, this is all shades of gray compared to Fixed Income Indexes, and the funds that follow them. Continue reading

President Trump!

presidential electionRonald Reagan, Jesse Ventura, Arnold Schwarzenegger, and Al Franken are all former entertainers who made big splashes in their first run for public office.  But never has that first run landed someone in the White House!  Not since Dwight Eisenhower has a President been elected having never held elective office.

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Is it time to break up with your fund manager?

Fund Manager BreakupBy now you probably know that your duty to look after your investments does not end after the initial due diligence of selecting an investment manager. Manager selection is a crucial first step, but that is really only the beginning. You must establish a process to prudently monitor your investments with quantifiable criteria that will systematically generate a review of underperforming investments. Common reasons to replace an investment might include the investment manager retiring, the investment taking excessive risk, or the investment’s performance lagging the benchmark. However, sometimes after a thorough review of your investment it could make sense to retain it instead of replacing it. Let’s look at some of the reasons to not break up with or fire your investment manager. Continue reading

Negative Interest Rates – what do they mean to you?

For all of financial history, there has been a basic premise. The premise was that if I loaned you money, you would pay me back more than I lent you. Typically, the money paid back that is above the repayment of the principle is classified as “interest”. Even in Muslim countries that do not believe in interest, there is a fee charged for the privilege of borrowing money. Continue reading

Q3 2016 Capital Markets Review

3rd Qtr 2016 Capital Markets ReviewWith the important 4th quarter ahead of us, it’s time to check the rearview and see what transpired last quarter to get us where we are. Most markets trended up for the quarter, and there were no major geopolitical drivers for under- or out-performance. There are still a slew of worries surrounding global markets such as conflict in the Middle East, North Korea’s nuclear tests, weakness in banking in Europe (highlighted by recent trouble from Duetsche Bank, one of Germany’s largest banks), oil price stability, slowing growth, and elections in the United States. The growing trend of populism and protection from trade has also been on the rise and may potentially have a chilling effect on the global economy. The markets seem to be getting used to unconventional Central Bank policy. The Bank of Japan is leading the charge to this uncharted territory, with unprecedented buying of Equity and Fixed Income securities, negative interest rates, and now a focus on the yield curve to help prop up financial institutions. Continue reading

All indexes are the same, right?

All Indexes Are the Same, Right?For the past decade or so, index funds have become all the rage from academia, to Middle America, to the corporate boardroom. Index funds are designed to replicate the performance of an underlying index by buying all (or substantially all) the securities in that index. There are dozens of index providers such as S&P, Dow Jones, Morningstar, Russell, CRSP, and MSCI. Index mutual fund companies pick one of these index providers to build their index funds around. However, some investors are surprised to discover that all indexes with the same mandate don’t necessarily perform the same. Continue reading

Q2 2016 Capital Markets Update

We experienced a very quiet, low-volatility market for the first two months and 3 weeks of the 2nd quarter.  Then the Brexit happened!

For most of the quarter, equity investors continued the trend of climbing the wall of worry.  The quarter saw concerns over the job market (only 38,000 jobs created in May[1]), no growth in corporate earnings (for the 4th consecutive quarter), uncertainty over future Federal Reserve rate hikes, and anticipation of the British referendum over whether to stay in the European Union.  But in the midst of all these concerns equity markets slowly climbed higher.  It was not until June 24, when the surprise result came out of Britain to leave the EU, that the markets received a jolt of volatility. Continue reading