The U.S. stock market remained resilient over the last quarter, as two of the best three months of 2018 occurred over the summer. The months of July and August both added over 3% to the S&P 500. After a slight consolidation in early September, the markets rallied on anticipated good earnings and ended the month with positive gains. Overall, Q3 was the best quarter for the U.S. markets this year.   

Economic fundamentals remain strong as one of the longest bull markets in history climbs a “wall of worry.” GDP growth continues to rise above levels we haven’t seen in several years, unemployment fell below 4% in September, and consumer confidence remains at levels not seen since 2000. Wage inflation reported last month was the highest in years, as the job market continues to tighten. The positive economic environment faces several challenges including rising interest rates, trade and tariff concerns, and mid-term elections. We believe these concerns and headwinds will keep the growing economy in check from detrimental inflation.  

The Federal Reserve raised rates by 25 basis points in September, the third rate hike this year. The committee reiterated their positive assessment of the U.S. economy and removed the accommodative language from their statement. Another interest rate hike is anticipated this year with several more expected next year. The Federal Reserve remains aware of the potential economic risks and are willing to reevaluate their outlook and time table if needed.

Healthcare, technology, and consumer discretionary sectors lead the U.S market higher while the defensive sectors underperformed. 

The third quarter was the best quarter for healthcare in several years. This comes as consumers realize the positive impacts of the strong economy and become more willing to utilize healthcare and engage in life-changing treatments.

Technology remains the dominant driver of this bull market. As innovation continues to advance, tech companies are capturing additional consumer and corporate spending. Apple and Amazon both hit $1 trillion in market cap, providing additional momentum for both stocks. We believe consumer-oriented sectors will continue to lead the market through the holiday season.

The energy sector is also higher for 2018 as the price of oil has steadily increased over the past year and now trades comfortably over $70/barrel. We expect oil prices to continue to gradually increase as the global economy expands and the U.S. prepares to impose sanctions on Iran in the next couple months.

Looking ahead, we anticipate strong consumer spending through the close of the year. Consumers seem to be willing to spend on lifestyle enhancements as wages tick up and consumer confidence continues to be robust. In addition, we believe corporate earnings will remain strong as the tax cuts take effect and create a greater competitive edge for U.S companies. During this past quarter, 80% of the earnings reported by S&P 500 companies beat earnings expectations.

Despite the robust U.S economy, there are several headwinds in the U.S. economic outlook. Trade tensions, political turmoil in Washington, and rising material costs could negatively impact the markets. The international markets remain under pressure as trade tensions, the strong U.S. dollar and foreign debt issues weigh on the global markets.

We remain cautiously optimistic on the U.S. equity markets for the balance of the year. We anticipate the healthy U.S. economy and strong consumer confidence to be the defining force for the fourth quarter.

As always, please don’t hesitate to give us a call with any questions.


The U.S. stock market pushed slightly higher during the second quarter of 2018. Consumer and business confidence, strong economic data, and earnings growth continued to boost the market.  However, gains were tempered by recent developments in Washington. Trade concerns and geopolitical risks caused uncertainty which lead to volatility in the stock market.

The current economic outlook remains positive, supported by the accelerating U.S. economy, U.S. consumer spending, and low unemployment. Job growth accelerated in May and the unemployment rate fell to 3.8%, indicating a strong economy and tight labor market. Wage growth remains low, but more recently has shown some improvement as employers are forced to increase wages to retain or attract employees.

The solid economic activity and low unemployment has encouraged the U.S. Federal Reserve to continue raising interest rates. The Fed increased rates again in June and expect to raise rates another two times before the end of the year. Fed Chairman Powell continues to take a hawkish stance as the unemployment rate falls and the economy strengthens. Inflation remains low, but has recently come under some upward pressure.

We remain optimistic on U.S. equities, as corporations benefit from the 2017 tax-reform and robust consumer spending. Productivity has strengthened and retail sales increased, pushing the U.S. GDP higher. We believe earnings growth will continue in the second half of the year. In addition, an increasing number of mergers and acquisitions have developed recently as companies use their cash piles and tax savings to increase capital spending and fund new opportunities. AT&T was recently approved to acquire Time Warner by the DOJ, a deal that will be remembered for years to come. The media landscape continues to change rapidly as Comcast and Disney battle over acquiring 21st Century Fox.  In our opinion, the wave of mergers and acquisitions will spread to other industries as capital remains historically cheap and easing regulations are supporting mergers.

A couple of areas of emphasis are the consumer discretionary, energy and technology sectors fueled by the momentum of the strong economy and consumer spending. In addition, we continue to believe rising interest rates will positively impact the financial sector.

Despite the strong U.S. economy, trade tensions persist and geopolitical issues remain on the horizon. The Trump-Kim summit in June was monumental and reduced some geopolitical concerns as the two agreed to work together to end North Korea’s nuclear program. In more recent news, trade concerns have ramped up, specifically with China and Canada. We believe Trump continues to use trade tariffs as a negotiation tool with foreign countries. However, if the trade rhetoric continues, it will negativity affect economic growth and become a drag on corporate earnings.

Despite the volatility, geopolitical risks, and trade concerns, we remain cautiously optimistic for investors in the equity markets for the balance of the year. We believe the healthy economy combined with consumer confidence will be the defining force in the second half of 2018.

As always, please don’t hesitate to give us a call with any questions. 

Quarterly Market Update

The three week “melt-up” in January continued the 2017 rally, but soon came to an end as the markets quickly pulled back, falling 10% in two weeks. After a relatively calm 2017 with volatility near all-time lows, heightened volatility is to be expected for 2018. We believe the pullback is healthy and needed for the market to continue higher. Although we think the recent volatility has been short-term focused, we continue to monitor the daily moves in light of the bigger economic picture.

Recent developments involving the Trump administration, such as the resignation of Gary Cohn and the announcement of tariffs has negatively impacted the equity market, but these negative reactions have primarily been followed with fairly quick rebounds. As we have learned over the past year, the President seems to soften his rhetoric during negotiations. We believe this is part of his overall strategy to instigate change. The end result of the tariffs is uncertain. We continue to monitor their impact on the consumer and the economy, but we believe the Trump administration will successfully negotiate to avoid a full-blown trade war.

Uncertainty with the new Federal Reserve Chair has also contributed to market volatility. Last week the Fed raised interest rates and Chair Powell took a more aggressive approach than many expected. We continue to anticipate at least two more interest rate hikes this year. Although this has raised inflation worries, we believe intense competition drives down the threat of runaway inflation, allowing the bull market to continue as long as rates rise modestly and predictably.

We believe the market will continue to climb the “wall of worry” as solid economic growth and earnings overcome new developments of political, economic, and global risks. The U.S. economy looks healthy, earnings remain strong, unemployment remains low and wage inflation is gradually increasing. In addition, we believe the tax reform and repatriation of foreign held dollars will expand economic growth. 

Therefore, we anticipate the bull market to continue, albeit with increased volatility.

As always, please call with any questions or concerns regarding your investments. 

Quarterly Market Update

Happy New Year! Thank you for a great year and your continued business.

All three major indexes closed at or near their all-time highs. The S&P 500 ended the year up approximately 22%, led by the technology sector. It was a stellar year for investments and overall capital growth. The markets experienced very little volatility as the VIX (Volatility Index) is near historic lows and the biggest single-day drop on the S&P 500 was less than 2%.

We believe the market appreciation was the result of many factors, primarily increased consumer spending and low interest rates. The job market strengthened as unemployment continued to fall and ended the year near historic lows. Increasingly positive consumer sentiment and glimmers of wage inflation helped to push consumer spending higher. Wage inflation in the labor market grew slightly, keeping overall inflation in check.

Generally, consumers remained selective with their spending by only buying products believed to be worth the cost. This trend persisted through the fourth quarter, with a sharp division between the successful retailers and retailers struggling for sales. In addition, two major hurricanes and the California fires will extend spending, as rebuilding continues and homes are reestablished.

Corporate earnings strengthened as the current administration pushed to lower corporate taxes, roll back regulation, and create more pro-business policies. With the passage of the Tax Reform Bill, we believe repatriation of domestic earnings from foreign markets will be a primary market driver in 2018. We expect that repatriated dollars will lead to more mergers and acquisitions among corporations.

A growing middle class in China, positive economic activity, and strengthening expansion pushed international equities higher. We believe foreign economies will continue to recover, providing an opportunity for further growth. In addition, oil recently closed above $60/barrel. We believe the energy sector will continue to benefit from global growth and be a favorable area for new investments in 2018.

We also expect the financial sector to be favorable in 2018. As the Federal Reserve gradually raises interest rates over the next couple years, financial institutions will be a direct beneficiary.

Although we expect the markets to push gradually higher in 2018, we believe increased volatility and normal pullback to be expected. A few areas we believe could negatively impact the markets are heightened geopolitical issues, concerns around our current administration, and a drastic uptick in inflation or interest rates.

As always, we continue to monitor the market environment and your portfolio. Please feel free to give us a call with any questions.


Third Quarter Update.

The markets continued their rally through the third quarter with the US indices sitting at or near all-time highs. Historically, September is the worst month of the year, but fortunately the markets weathered the month as volatility remained low and the markets trended higher. 

The trend upward was led by international equities, especially emerging markets. Improving global economic conditions, strong earnings, and a weaker U.S. dollar contributed to much of the international gains. Non-U.S. markets proved to be further ahead economically than expert’s forecasts. Emerging markets outperformed in Q3, up 8%, leading the global stock markets. In October, we could see international stocks hit new all-time highs, the first time since its peak in 2014. We believe this rally in the international markets will continue as Europe and other major economies recover and fuel further global economic growth.

U.S. equities were not as strong as their international counterparts, but still the S&P 500 pushed 4.5% higher in Q3. The S&P 500 has provided eight consecutive quarters of positive gains. We believe strong corporate earnings and positive economic growth are the major contributors to the U.S. rally. Although we foresee brief pullbacks and periods of heightened volatility, especially in specific sectors, we expect positive returns for the next couple of quarters. The domestic markets will continue to drift higher as a result of the tightening labor markets, improving global economy, and potentially, tax reform.

As fundamental economic indicators improve, it solidifies the appreciation of the capital markets. Consumer sentiment remains high as unemployment continues to trend lower and inflation remains low. The recent devastating storms will likely increase spending in Q4, especially in the retail sector as residents and businesses begin to rebuild. Although the hurricanes may negatively impact other sectors of the market, we believe the upcoming earnings season will have a positive impact on the stock market.

Oil has had a rocky year and energy has been the worst performing sector until recently when oil rallied towards the end of the third quarter. The improving international markets are increasing demand and commodity markets are slowly stabilizing the supply and demand balance. Higher commodity prices should be expected for the intermediate-term, causing an increase in global GDP growth - a positive sign for further improvement in global economies.

Although there is concern that the political divide will make it more difficult to pass policy changes, we foresee some type of tax reform to take place this year. In addition, we believe an infrastructure bill remains on the horizon for 2018. We expect that both bills will have a positive impact and stimulate the U.S. economy.

The markets continue to remain resilient through the heightened geopolitical concerns in the third quarter. The problems with North Korea and rhetoric from Kim Jong-un remain a concern, but the markets thus far have felt little impact. In addition, President Trump’s strong communication and impulsive tweets remain an issue and seem to cause further divide in our country. We continue to monitor these issues and the risks associated with these concerns.

As always, please don’t hesitate to reach out to us if you have any questions. 

Quarterly Market Update

Happy 4th of July!  

As the second quarter comes to a close, there are many situations we continue to monitor. Please call us if you have specific questions regarding our investment thesis or questions about your account.

The market held steady in Q2 and added to the positive performance that we experienced in the first quarter of this year. Economic numbers continue to show improvement, but not strongly enough to suggest inflation risk is on the horizon. We believe the Federal Reserve will remain positive on raising rates, but use methodical and conservative measures to determine the timing of those rates.  

Most of the major investment themes from the first quarter persisted through the second quarter. Traditional retail continues to struggle, and Amazon resumes their push for innovation as they announced their intention to purchase Whole Foods Market. There are many reasons why Whole Foods is an attractive acquisition for Amazon, most notably every Whole Foods location can now be used as a distribution channel for Amazon’s products. This is an appealing asset for Amazon as they continue to solve the “last mile” problem for same day delivery and respond to Walmart’s acquisition of Jet.com. Innovation will be the major theme for retail and grocery stores over the next couple of quarters. 

The financial sector had a strong finish in the second quarter. Banks have passed their Fed-mandated stress tests, and are showing strong balance sheets and low debt levels. After a brief pullback mid second quarter, the financial sector looks to resume market leadership in a summer rally. Banks and financial institutions will remain an attractive investment theme into 2018.

Energy and oil companies continue to underperform as OPEC and oil producing countries attempt to create production limits. After the pullback in the first half of the year, energy is an attractive area for new investment dollars.  Oil prices will rise in response to an improving global economic outlook. As energy prices recover, we are targeting high dividend paying equities and oil conglomerates. We believe oil will trade consistently over $52 a barrel by the end of 2017.

Lastly, political news is a source of concern for the markets as the Republican party attempts to find some common ground to work on their political agenda. We continue to watch the newly proposed Health Care Bill. In its current form, we are not optimistic on the passing of the bill. The Republican party seems to be fractured in its support of the President’s agenda, which will likely cause volatility in the markets for the foreseeable future. In addition, President Trump’s approach to international diplomatic concerns raises risk levels in the market. However, we believe some type of tax reform will be accomplished by the end of the year― a positive move for our economy.

We will continue to monitor the markets for opportunities and risks and adjust accordingly. 

Please call us with any questions. We look forward to hearing from you soon.

Quaterly Market Update

First Quarter 2017 Market Update

The market continued its strong post-election rally into the first quarter of 2017. Even though the markets have delivered impressive returns, we believe there are many reasons why the rally will continue through 2017. However, we have some concerns, e.g. the President leading the U.S. into a trade war or continuing to push an isolationist agenda. Overall, we believe the growth in the economy, good employment numbers, and a political platform based on lower regulation and tax reform outweighs the potential risks and will lead the markets higher.

The most compelling argument for further market gain is continual economic growth. The economy started to gain traction and experience sustainable growth approximately 18 months ago. The U.S. is at or near full employment and the workforce is starting to drive wage inflation.  As wage inflation continues, we believe that American consumers will increase their spending. This will drive retail stocks, consumer discretionary companies, and home improvement stores like Home Depot and Lowes, as owners tend to renovate their homes rather than purchase new ones in a rising interest rate environment.   

In addition to an improving economy, the President has outlined a platform of lower regulation and an infrastructure improvement bill.  The lowering of regulation, especially rolling back parts of the Dodd-Frank Bill will help money centers with lending approvals. In addition, we believe the need for infrastructure improvement is large enough that it should be endorsed by both sides of the aisle in Congress. New Infrastructure spending should benefit companies like Caterpillar, Deere, and engineering and supply companies in construction. These industries should continue to grow as spending accelerates.

The Federal Reserve has deferred raising interest rates to normal levels despite improving economic data, partially from concern that foreign economic issues would hamper U.S. economic growth. However, foreign economies look to be in a bottoming process and international “green spots” of growth are emerging. Because of the positive signs in U.S. economic growth and diminished international risk, the Fed has hinted at two potential interest rate hikes this year. High short term interest rates will be very positive developments for financial institutions and banks.

The failure of the Republicans to reach consensus within their own party in the effort to pass health care reform is an interesting development. We believe this could be potentially positive as it is evidence that the checks and balances of our government are working as they should. No majority party should be able to pass laws unhampered by opposing views, whether by other parties or members of its own. This latest impasse could make the many factions in Congress and the Senate work together toward a middle ground -  unless they are resigned to a perpetual standoff. 

Lastly, as we look to April, taxes will be a leading topic throughout the month. The President has indicated that he wants to pursue corporate and personal tax reform. Again, this could help improve economic growth as companies will look to re-patriate foreign earnings at a more competitive global rate than the current corporate tax rate. In addition, if some relief is implemented on personal tax rates, consumers will have more discretionary funds, which will lead to improved corporate earnings. This will not be an easy process nor without negotiations, as our national debt continues to grow to unprecedented levels.  However, if the economy continues to show improvement, the national debt should become more manageable over time, mirroring the accumulated debt burden of the early 1990s that culminated with debt reductions into the late 1990s.

If you have any questions, please don't hesitate to reach out to us. We look forward to hearing from you.

Quarterly Market Update

Closing Out 2016 and Looking Ahead to 2017

The markets rallied for the third quarter in a row to round out a very good year for investors.  The bleak and nervous moments of February 2016 were overcome by optimism in December.  The President-Elect and his perspective on the government is giving investors cautious optimism about 2017.  Several themes generating investor interest are less regulations on corporations- especially banks, major infrastructure investments and a change in the way the government approaches the issues at hand.  The President-Elect looks to solve issues as business problems, thereby creating opportunity for the U.S. people.  This is in contrast to the current administration that seeks to mitigate opportunity issues via more comprehensive social welfare programs.  It seems that the two strategies could not be more different, but each has its own valuable perspective.  This is something that we will continue to monitor and make changes to our investment portfolios as needed.  

One condition that will not change in 2017 is volatility.  We believe volatility will be a major theme in 2017 as the President-Elect chooses to use social media, especially Twitter to communicate quickly and create change.  This is not a well-controlled medium, as the information is instantly disseminated and the intent of the message can be easily lost if not carefully worded or crafted.  Social media can be an effective way to communicate if used properly, but we believe the world has yet to adapt to this changing medium.  And while the world adapts, we are sure volatility will ensue.  Last year, there were three major events causing volatility, the initial pullback that started the year, BREXIT and the Presidential Election.  The S&P 500 Index lost more than 10% in the first six weeks of the year and finished the year up over 9%- a more than 20% move in the index.  We believe there will be more volatility, but the indexes will remain positive for 2017. 

For the first time in almost a decade, the Federal Reserve raised interest rates two times in a year. We believe that the Fed will continue to raise short term interest rates this year and subsequent years. This investment theme will likely be a three to five-year story as the Fed tries to restore short term rates back to normal levels. This is a sign that the economy is growing and economic numbers are continuing to improve.  We believe that the Fed will raise rates another two times this year with the possibility of a third, if the economy continues to improve through the third quarter.

Lastly, employment numbers are inching closer to full employment, with some wage inflation being reported.  This is good news for retailers, especially online and box retailers like Walmart, Home Depot, Target, and Lowes.  We believe consumers will continue to increase spending and be the driving force behind targeted companies in the consumer discretionary sector.  In addition, consumers are not burdened by high fuel costs as oil prices have recovered to $53 dollars a barrel and are likely to remain in a trading range of $45-$60 a barrel. This will also help to bolster consumer spending and consumption.       

As always, please call if you have any questions.

All the best and Happy New Year!