At Any Rate…
David Lemire
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 of over $2 billion.
OverviewDisclosures
Strategic Financial Services, Inc. is a SEC-registered investment advisor. The term “registered” does not imply a certain level of skill or training. “Registered” means the company has filed the necessary documentation to maintain registration as an investment advisor with the Securities and Exchange Commission.
The information contained on this site is for informational purposes and should not be considered investment advice or a recommendation of any particular security, strategy or investment product. Every client situation is different. Strategic manages customized portfolios that seek to properly reflect the particular risk and return objectives of each individual client. The discussion of any investments is for illustrative purposes only and there is no assurance that the adviser will make any investments with the same or similar characteristics as any investments presented. The investments identified and described do not represent all of the investments purchased or sold for client accounts. Any representative investments discussed were selected based on a number of factors including recent company news or earnings release. The reader should not assume that an investment identified was or will be profitable. All investments contain risk and may lose value. There is no assurance that any investments identified will remain in client accounts at the time you receive this document.
Some of the material presented is based upon forward-looking statements, information and opinions, including descriptions of anticipated market changes and expectations of future activity. Strategic Financial Services believes that such statements, information, and opinions are based upon reasonable estimates and assumptions. However, forward-looking statements, information and opinions are inherently uncertain and actual events or results may differ materially from those reflected in the forward-looking statements. Therefore, undue reliance should not be placed on such forward-looking statements, information and opinions.
No content on this website is intended to provide tax or legal advice. You are advised to seek advice on these matters from separately retained professionals.
All index returns, unless otherwise noted, are presented as price returns and have been obtained from Bloomberg. Indices are unmanaged and cannot be purchased directly by investors.