As contrarians, we maintain an overweight to equities and will continue to allocate to weak areas within the equity market. We are using equity volatility to upgrade portfolios into either higher quality dividend-paying companies and stocks with a margin for safety. We continue to favor higher quality companies that are attractively valued, with solid balance sheets and that are strong cash flow generators.
We remain vigilant and ever watchful but also hopeful. The market has climbed a wall of worry as it always does when it rallies. Will it get through the new highs this time or simply be another failed test? We don’t know; no one does. But we will keep ensuring that every position in our clients’ portfolios are carefully thought out as best we can and give our constituents the best chance for success in this anxious, low interest rate world without precedent.
There were two very different eighths to the quarter that made up the first three months of 2016.
January started with a plunge, the worst start for U.S. stock markets in more than eight decades. Fears included: a hard landing/significant slowdown of the Chinese economy, the Bank of Japan’s pursuit of negative interest rate policy, domestic recession concerns, further Federal Reserve (“Fed”) interest rate hikes, a sudden and huge drop in world oil prices, global economic and geopolitical strife, and U.S. election jitters.
After several years of the Federal Reserve (“Fed”) maintaining a zero interest rate policy, it elected to raise the federal funds rate by 0.25% this past December- the first hike in a decade. The move was widely anticipated and telegraphed by the Fed. Conversations turned quickly toward anticipation and timing of the next raise. We think we will be having this conversation for months, if not years, to come. However, that doesn’t mean it has imminent bearing on our overall investment strategy decisions.
Volatility returned to the equity markets in the third quarter, impacted by economic stress in China, the world’s second largest economy, and Greece, coupled with underwhelming corporate earnings reports and falling energy prices. Some parts of the economy that offered favorable news were housing and unemployment; others, including exports and wages, showed little in the way of positive movement. As a result, the Federal Open Market Committee once again declined to raise interest rates, noting that inflation still hadn’t reached the committee’s preferred target rate of 2.0%.
This past quarter would appear to have been a bit of a yawner if judged solely on price change in the equity markets. While bonds experienced an uptick in yields, the results were negative total returns across the different bond sectors with long dated bonds down -7.6%. Other areas hit hard by higher rates were: REITs (-9.1%) and utility stocks (-10.7%). Strangely enough major domestic large cap, mid cap and small cap indices as well as international developed and emerging market indices all ended within a fairly tight range, with the best performance coming from the growth stock laden NASDAQ Composite +1.75%. The S&P 400 Index (mid-cap stocks) was the weakest, losing -1.06% in the period. Given the cacophony of handwringing and noise, an alien looking down on Earthlings from 265,000 feet would be justified in saying, “These humans need to relax!”
The first quarter of 2015 was marked by volatility in the equity markets. There were more up and down moves of 1% than there were for the entire year 2014. One surprise that has continued to hamper and trouble the markets has been lower oil prices. After more than a 40% drop, oil has remained low but is starting to show the first signs of firming.
Happy New Year! We start the year with good news. First, Pamela Weldon has been named Operations Manager in addition to her Senior CSA role (Client Service Administrator). Ashley Buffone has been promoted to Senior CSA. Client feedback has consistently reflected our very positive day-to-day interactions with these two professionals. We rely on their good judgment and diligence daily and are pleased with their continuing development; they are both a joy to work with, and they support each other so well. At our front desk and on the phone, you will now find Justine Carr has joined us as a CSA. Justine comes to us from State Street Bank where she was a Client Service Specialist and the point of contact for a large number of investment managers. Prior to joining State Street, Justine graduated from the University of Massachusetts – Dartmouth with a B.S. in Finance, minoring in International Business.
We are very excited to share with you that Shorepoint is approaching our Five Year Anniversary! Luis and I started working together in the aftermath of the greatest financial collapse since the Great Depression. During the last five years, we have tripled the number of clients we serve, while the amount of assets we manage has risen by more than five fold. Luis and I are very thankful – to you, our clients and colleagues, for the support from our families, and to our stellar team, rounded out by Brian, Pam and Ashley. We understand that this growth has been a collaborative achievement, and we are very grateful for the confidence and support we have received along the way. We will remain focused on continuing to deliver on our commitments in the years to come and we will always strive to serve our clients better.
We would like to welcome former Orienteer Financial clients to Shorepoint Capital Partners, and we look forward to working with you. We are also very pleased that Brian C. Keating, CFP®, founder of Orienteer Financial, is joining the Shorepoint team as a Senior Wealth Manager. Brian brings over two decades of financial planning and investment management experience to our firm. Our group is dedicated to providing people with advice for their financial planning and investment needs in thoughtful and simple terms. Our enjoyment of our work and colleagues (further enhanced by Brian’s presence) will be evident to you and provide you with a resource for input that is dependable, creative, and prudent. With that said, we always welcome feedback on how we can serve you better.
