Rally Sauce
Doug Walters
Stocks rallied in the face of terrorist activity to post the best 5 day stretch of 2015. Investors embraced policy certainty as a December rate hike now looks likely.
Market Review
Contributed by Alan Leist, III
Bring It On
After years of hemming and hawing, a long feared and much debated Fed policy change is upon us.
- As if often the case with markets, the reaction from stocks was quite different than what might be expected.
- After years of ultra-easy monetary policy, the intuitive interpretation of a policy regime change would call for stocks to retrace much of the bull market advance.
- Policy clarity, the signal that it sends (the economy can take it) and the promise to go slowly all gave confidence to investors ready to chase a year-end rally.
United We Stand
The tragedy in France has provided an international wake-up call to fight this growing threat and work together to end ISIS.
- We suspect that some of the rally in stocks this week was due to relief that real action is now being taken.
3rd Quarter Earnings Recap
Contributed by Doug Walters
Over 95% of S&P 500 companies have reported and earnings season is coming to a welcome end. We look at the best and worst that earnings had to offer.
Poor delivery
With oil prices continuing to slide, the weakness in Energy earnings is no great surprise. Yet the scale of decline is cause for pause, with Q3 sales and earnings falling 36% and 57% year on year respectively.
- The Materials sector faired only slightly better, down double-digits.
Healthy earnings
Ex-Energy, S&P 500 growth was positive, with the greatest contributor by far being Health Care.
- Telecoms showed the highest growth, but the sector is small and the growth was largely acquisitive.
As bad as it gets
With investing, it is not where we’ve been, but where we are going. When trends are at their worst is often a good time to be build positions.
- Such would appear to be the case with Energy and Materials. Despite dismal results, these two beat up sectors are amongst the best performers thus far this quarter. Regular rebalancing and careful analysis allows investors to capture this dynamic.
“With investing, it is not where we’ve been, but where we are going. When trends are at their worst is often a good time to be build positions.”
Doug Walters, CFA, Chief Investment Officer
Asset Allocation
Contributed by David Lemire
A new day – a new market
Last week’s Fed induced retreat gave way to a Fed induced rally this week. While a rate hike appears baked in at this point, the pace of hikes seems to be patient and slow.
Dollar Strength
While international equity markets rallied, other dollar sensitive assets struggled. Commodities and gold continue to plumb multi-year lows.
Portfolio Positioning
Equity weights across most portfolios have increased this month week with complementary assets (even REITs) declining. Bonds largely remained steady, while cash levels declined due to some stock purchases within Equity Income and Strategic Growth.
Strategic Growth
A Heavy Hit
A clear leading sector was not visible as most sectors had a nice run. The clear laggard continues to be energy. In other strategy news…
- Nike Inc. (NKE) provided several shareholder friendly announcements this week. The company will increase its dividend 14%, add $12 Billion to its existing $8Bil stock buyback authorization and split the stock 2 for 1. They also sell curling shoes, a fast growing sport at Strategic!
Fewer Mates
A clear leading sector was not visible as most sectors had a nice run. The clear laggard continues to be energy. In other strategy news…
- Nike Inc. (NKE) provided several shareholder friendly announcements this week. The company will increase its dividend 14%, add $12 Billion to its existing $8Bil stock buyback authorization and split the stock 2 for 1. They also sell curling shoes, a fast growing sport at Strategic!
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