Skip to content

Strategic Insights

Volume 4, Edition 28 | July 27 – 31, 2015

Mailing List

There are currently 975 subscribers.

At Any Rate…

David Lemire | Articles

Read Time: 3:45 min

at_any_rate

Stocks stabilized after a mini-selloff and then rallied on the back of cautious Fed comments, relative calm in China’s markets and some upbeat earnings reports.

Market Review

Contributed by Alan Leist, III

Stocks stabilized after a mini-selloff and then rallied on the back of cautious Fed comments, relative calm in China’s markets and some upbeat earnings reports.

Like a Rock: Investors liked what they heard in the Fed statement released Wednesday as Chairwoman Yellen offered a little something for everyone.

  • By signaling that the job market is “solid”, the Fed confirmed plans for a ‘15 rate hike, the consensus view.
  • In support of the hope that the tightening cycle will be deliberate, inflation was noted as a lingering concern.

Winter Break: China capped off a wild month with the announcement that they will host the 2022 Olympics.

  • Investors had less to cheer about after a 30% market decline, but with help from an always accommodative communist regime, prices stabilized (a little) this week.
  • USA Today ran a front page feature on China’s market crash, a contrarian indicator if ever there was one.
  • China’s respite allowed for a refocus on corporate earnings.

Economic Commentary

Contributed by Doug Walters

After the latest update to 2015 GDP growth data, we  take a fresh look at the health of the US economic recovery.

Familiar Pattern: The latest GDP report released by the Commerce Department turned out to be a mixed bag.

  • The revised Q1 GDP growth came in +0.6%, higher than the same period last year (-0.9%) and higher than the original estimates.
  • However, the overall growth rate for 1st half of 2015 still points to a less robust spring turn around than anticipated.

Key Drivers: 1st half growth was weighed down by sluggish consumer spending, a strong dollar and weak business investment.

  • The latest figures repeated a familiar pattern seen over the last few years: a strong sudden rise in growth that stalls out just as quickly.

Our Take: The recent GDP report, although lacking any blockbuster numbers, shows an economy that continues to grow at a modest but steady pace. *Businesses did scale back some of their spending, partly due to a fall in oil prices, but consumer and housing spending are beginning to pick up the slack.

  • All in all, the data is just good enough to have the Fed talk tightening despite what continues to be a historically weak recovery from recession.

Investment Strategy Update

Contributed by David Lemire , Max Berkovich

STRATEGIC Asset Allocation

Emerging Opportunity?: While China’s volatility continued at the start of the week before settling down, most U.S. based investors remain somewhat immune to the bigger declines. However, a stronger dollar continues to hit other emerging markets with Latin America hit particularly hard. The extent of the declines has prompted some rebalance discussions.

The Unknown Unknowns: Valuations are starting to look more attractive. However, China’s role as both an investment and a demand source remains complicated. The heavy hand of government intervention remains a source of uncertainty and necessitates a higher margin of safety.

STRATEGIC Growth

What a Long, Strange Trip It’s Been: Online travel company Expedia (EXPE) sent investors over the moon with an estimate topping quarterly report.

  • Strong international results drove the beat.
  • Investors are still eyeing the planned acquisition of rival Orbitz as the Justice Department evaluates the deal.

STRATEGIC Equity Income

Diaper (not) Dandy: Despite a Strategic push to single-handedly boost sales of Pampers through a mini-baby boom at the firm, Proctor and Gamble disappointed investors yet again.

  • Overall, sales dropped by 9% for the quarter as a strong dollar and anemic organic growth weighed on results.
  • Some investors are calling for a break-up of the behemoth.

About Strategic

Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on client assets over $1 billion.

Overview