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Happy Holidays! This time of year is good to slow down and reflect, which is what we will do with our quarterly update:
Summary, Last Qtr: In Q4, stock market volatility picked up in October and December. Concerns about global economic growth, the health of emerging markets, geopolitical tensions, and plunging oil prices have investors on edge, not to mention anticipating the Fed’s next move. Investors continue to rotate toward defensive sectors such as consumer staples, health care and utilities, helped in part by the steady decline in long-term interest rates. Additionally, the plunge in oil prices has been good for the American consumer, which played out in the holiday season, making it easier at the pump and thus more disposable income. This does have a negative side, in effect driving stock prices of oil companies down. This underscores a basic economics 101 rule that sometimes doesn’t need an in-depth explanation: supply and demand. As investors move away from riskier assets and into more defensive areas, we see that play out in stock prices of the respective asset classes. The decline in long term interest rates has an impact on bonds and their price movement, and we have seen investors – and funds – move away from longer term bonds because the risk of price decline still lives in that area of the bond market.
Our Commentary: We expect volatility to be a regular event as we slowly ease away from Federal support. Equities (stocks), especially U.S. equities, are still attractive however we see a light at the end of the tunnel for non-U.S. developed nations such as Japan and European countries. While we think it’s early to add positions to these investable areas, we do think there is an opportunity that may be similar to investing in U.S. stocks in the 2009-2010 time frame once those areas prove themselves worthy of investments. We have a healthier U.S. consumer, and add falling energy prices on top off that, and we expect the U.S. economy benefiting from increasing levels of consumer spending over the short term.
Our Investment Committee periodically monitors the markets and will continue to provide comments at the beginning of each quarter. Each portfolio is different and we recommend getting individual help, which we are happy to provide.
Happy holdidays, we will update in Q1 2015!
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