Summer is here! With vacations, baseball and lazy days ahead, thinking about the markets typically takes a back seat. But at The Retirement Network, we enjoy the markets as much as baseball, so we continue to monitor the markets, which makes it an opportune time to review the past quarter, our current state and where we see risk in the markets:
Summary, Last Qtr: Q2 brought expected Federal Reserve action as Janet Yellen establishes herself as the Federal Chairman, as well as geopolitical shocks and some consolidating in the growth area of the markets. While the Federal Reserve continues to closely monitor the flow of economic data, Ms. Yellen has suggested that the economy will continue to receive material accommodative policies for the foreseeable future. The unemployment rate has improved and inflation is still low, some would say stubbornly low, but the Fed sees these improvements as far from satisfactory. Hence the FRB will stay “accommodative” for now. The markets have reacted favorably to Yellen’s comments, with the S&P 500 increasing 4.21% year to date as of June 4th, albeit it not at the pace that we saw in 2013. The global political environment remains uncertain with the Ukraine voting to succeed to Russia, a decision that continues to be debated by the United Nations. Lastly, the Affordable Health Care Act is underway with less than impressive enrollment results, but slowly improving. Thus the FRB sees the need to keep interest rates low for companies to borrow and continue to expand, hopefully helping employment and returning the economy to normal employment levels.
Our Commentary: We continue to see equities as an area to overweight and the fixed income area as one to reduce exposure, or at least to reduce exposure to long term bonds. With the political risk environment and the slow interest rate rise, we see this year as favoring equities but the ride may be bumpier than last year. US equities continue to lead, especially the small to middle sized growth companies, and we believe this should continue for the near future with international equities also an area for positive developments. For investors that can tolerate the additional equity exposure, consider increasing equity exposure and reducing bonds, or using alternative assets and strategies as possible bond replacements. For investors that do not want to take on the additional risk, short term bonds or a stable value fund can be a replacement of long bond exposure.
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.
Have a relaxing summer and we will check back in October!
International investing entails special risk considerations, including currency fluctuations, lower liquidity, economic and political risks, and differences in accounting methods. Past performance cannot guarantee future results.
Fixed income securities carry interest rate risk. Fixed income securities also carry inflation risk and credit and default risks. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.
Certain statements contained within are forward-looking statements including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties.
Opinions voiced are not intended to provide specific advice and should not be construed as recommendations for any individual. To determine which investments may be appropriate for you, consult with your financial professional.
Indices are unmanaged measures of market conditions. It is not possible to invest directly into an index. Past performance is not a guarantee of future results.