Investment Insights Podcast: When it comes to crude oil, why lower for longer is a good thing

Holland_Podcast_150x126Tim Holland, CFA, Senior Vice President, Global Investment Strategist

On this week’s podcast (recorded July 12, 2017), Tim addresses crude oil, what’s been weighing on the commodity as of late, and whether we should view that weakness as a net positive or negative for the U.S. economy.

Quick hits:

  • Any, and all, discussion of crude oil must begin with fracking. Fracking has enabled energy companies to tap long known, but historically inaccessible deposits of oil and gas across the United States
  • The impact on U.S. production of oil and gas – and on global energy markets – has been revolutionary.
  • U.S. crude oil production should hit 10 million barrels a day in 2018
  • If Texas were an oil producing nation it would rank among the top 10 producers in the world

For Tim’s full insights, click here to listen to the audio recording.

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The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Investment Insights Podcast: Five things that I learned this week

Rosenberger_PodcastAndrew Rosenberger, CFA, Senior Investment Manager

On this week’s podcast (recorded January 13, 2017), Andy discusses some of the facts, figures, and interesting tidbits we come across. Quick hits:

  • Families will spend an average of $233,610 per child, from birth through the age of 17.
  • The World Economic Forum’s top five risks are 1) Extreme weather events 2) Large-scale involuntary migration 3) Major natural disasters 4) Large-scale terrorist attacks and 5) Massive incident of data fraud or theft.
  • Student loan debt now tops $1.4 trillion dollars.
  • The currencies of India, Mexico, and Russia are all undervalued to the tune of 25-45%.
  • U.S. oil production is now beginning to increase again.

For Andy’s full insights, click here to listen to the audio recording.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Investment Insights Podcast: Four Areas of Focus in the Last Quarter

Raupp_Podcast_GraphicJeff Raupp, CFA, Senior Vice President

On this week’s podcast (recorded October 21, 2016), Jeff highlights four focus areas to watch during the last quarter of 2016: the Fed, earnings, signs of recession, and the election.

  1. The Federal Reserve. Watch for a tightening of interest rates in December and dovish guidance (maintaining low interest rates) for 2017.
  2. Earnings. Watch for improvement in earnings as the pressure of low oil prices on energy companies starts to roll off.
  3. Signs of Recession. Watch for indicators that the business cycle is over. We believe we are in the second half of the cycle, and while it has been about seven years, economic growth has been more muted.
  4. Election. Watch for volatility as elections tend to cause uncertainty in the markets. However, markets tend to bounce back following elections as some of the uncertainty fades away.

For Jeff’s full insight, click here to listen to the audio recording.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Investment Insights Podcast: Loud Headlines

Rosenberger_PodcastAndrew Rosenberger, CFA, Senior Investment Manager

On this week’s podcast (recorded September 30, 2016), Andy reviews recent media headlines, including Deutsche Bank and OPEC, and if the news is more bark than bite. Quick hits:

  • Deutsche Bank shares set a new all-time low on September 29 and stock is now down almost 50% year to date.
  • Deutsche Bank needs to raise enough capital to alleviate investor concerns or financial authorities will have to step in to backstop the bank.
  • While the ghosts of Lehman Brothers may still haunt the minds of investors, it seems unlikely that financial authorities haven’t learned from 2008 and would be willing to take the same risk with Deutsche Bank should they fail.
  • Saudi Arabia agreed to limit future production of oil, and while there’s been a lot of skepticism that this new agreement will do anything to reduce oversupply and increase prices, it is the first time there’s been any sort of agreement out of OPEC since the sell-off began in 2014.
  • Given all the headlines, it’s easy to miss the more-positive news that has been released, like housing data and low unemployment.

For Andy’s full insights, click here to listen to the audio recording.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Investment Insights Podcast: Focusing In

Raupp_Podcast_GraphicJeff Raupp, CFA, Senior Vice President

On this week’s podcast (recorded September 23, 2016), Jeff focuses on three important events–third quarter earnings season, the election, and the Federal Reserve meeting in December. Highlights of his discussion include:

  • We view the negative impact on the energy sector to be mostly behind us, with year-over-year comparisons looking much more favorable.
  • The election, and the uncertainty it brings, will weigh on markets to some extent. Either way the election results go, we should have a little more clarity on forward policy, which is a positive.
  • A November interest rate hike is not off the table, but very unlikely. Prognosticators see a December hike becoming more likely.

For Jeff’s full insight, click here to listen to the audio recording.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Investment Insights Podcast: The Reluctant Bull

Hart_Podcast_338x284Chris Hart, Core Investment Manager

On this week’s podcast (recorded August 19, 2016), Chris discusses the current market environment, the looming concerns for investors, and what to expect as we near the end of the summer cycle.

Listen to the podcast here, but first, a few quick hits:

  • Markets continue to move higher, leading experts to describe it as a “reluctant bull” with investors skeptical of the rally.
  • Concerns over oil, China, and the Federal Reserve continue to preoccupy the markets and are still worrisome, but perhaps less so than a few months ago.
  • Domestic stocks have risen in six of the last eight weeks thanks in part to more positive corporate results.
  • While the economy is late in the business cycle and not calling for an acceleration, the strength of the market is noteworthy.
  • As we enter the seasonally weak late summer period in the markets, uncertainty remains especially with the upcoming election.
  • Overall, we remain constructive on risk assets but cautious in our outlook and we maintain our focus on finding select opportunities to take advantage of.

For Chris’s full insight, click here to listen to the audio recording.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Earnings Season Upon Us, but Information Void Looms

Raupp_Podcast_GraphicJeff Raupp, CFA, Senior Investment Manager

On this week’s podcast (recorded August 1, 2016), Jeff covers the current themes impacting markets, including Brexit, earnings season, and the presidential election. Highlights of his discussion include:

  • Since the initial negative reaction from the Brexit vote in late June, markets have rebounded sharply, with U.S. stocks up over 15% since the June 27 lows and international stocks up over 10%.
  • Late summer and fall loom as somewhat of an information void, where economic data is a little sparser and investors have a harder time seeing the impetus for the next leg up in the market.
  • It wouldn’t be surprising to see a pause in the upward momentum in the markets until we get more clarity about the direction of the election.
  • This past week, housing, earnings, employment and wages all had positive reports, but were offset by a very disappointing GDP number.

For Jeff’s full insight, click here to listen to the audio recording.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

May 2016 Monthly Market And Economic Outlook

Amy MagnottaAmy Magnotta, CFASenior Investment Manager, Brinker Capital

Continuing the rally that began in mid-February, risk assets posted modest gains in April, helped by more dovish comments from the Federal Reserve and further gains in oil prices. Expectations regarding the pace of additional rate hikes by the Fed have been tempered from where they started the year. Economic data releases were mixed, and while a majority of companies beat earnings expectations, earnings growth has been negative year over year.

The S&P 500 Index gained 0.4% for the month. Energy and materials were by far the strongest performing sectors, returning 8.7% and 5.0% respectively. On the negative side was technology and the more defensive sectors like consumer staples, telecom and utilities. U.S. small and micro-cap companies outpaced large caps during the month, and value continued to outpace growth.

International equity markets outperformed U.S. equity markets in April, helped by further weakness in the U.S. dollar. Developed international markets, led by solid returns from Japan and the Eurozone, outpaced emerging markets. Within emerging markets, strong performance from Brazil was offset by weaker performance in emerging Asia.

The Barclays Aggregate Index return was in line with that of the S&P 500 Index in April. Treasury yields were relatively unchanged, but solid returns from investment grade credit helped the index. High-yield credit spreads continued to contract throughout the month, leading to another month of strong gains for the asset class.

We remain positive on risk assets over the intermediate-term; however, we acknowledge that we are in the later innings of the bull market that began in 2009 and the second half of the business cycle. The worst equity market declines are typically associated with recessions, which are preceded by aggressive central bank tightening or accelerating inflation, factors which are not present today.  While our macro outlook is biased in favor of the positives and a near-term end to the business cycle is not our base case, the risks must not be ignored.

A number of factors we find supportive of the economy and markets over the near term.

Global monetary policy remains accommodative: The Fed’s approach to tightening monetary policy is patient and data dependent.  The Bank of Japan and the ECB have been more aggressive with easing measures in an attempt to support their economies, while China may require additional support.

Stable U.S. growth and tame inflation: U.S. economic growth has been modest but steady. While first quarter growth was muted at an annualized rate of +0.5%, we expect to see a bounce in the second quarter as has been the pattern. Payroll employment growth has been solid and the unemployment rate has fallen to 5.0%. Wage growth has been tepid at best despite the tightening labor market, and reported inflation measures and inflation expectations, while off the lows, remain below the Fed’s target.

U.S. fiscal policy more accommodative: With the new budget, fiscal policy is poised to become modestly accommodative in 2016, helping offset more restrictive monetary policy.

Constructive backdrop for U.S. consumer: The U.S. consumer should see benefits from lower energy prices and a stronger labor market.

However, risks facing the economy and markets remain, including:

Risk of policy mistake: The potential for a policy mistake by the Fed or another major central bank is a concern, and central bank communication will be key. In the U.S. the subsequent path of rates is uncertain and may not be in line with market expectations, which could lead to increased volatility. Negative interest rates are already prevalent in other developed market economies. An event that brings into question central bank credibility could weigh on markets.

Slower global growth: Economic growth outside the U.S. is decidedly weaker, and while China looks to be improving, a significant slowdown remains a concern.

Another downturn in commodity prices: Oil prices have rebounded off of the recent lows and lower energy prices on the whole benefit the consumer; however, another significant leg down in prices could become destabilizing. This could also trigger further weakness in the high yield credit markets, which have recovered since oil bottomed in February.

Presidential Election Uncertainty: The lack of clarity will likely weigh on investors leading up to November’s election. Depending on the rhetoric, certain sectors could be more impacted.

The technical backdrop of the market has improved, as have credit conditions, while the macroeconomic environment leans favorable. Investor sentiment moved from extreme pessimism levels in early 2016 back into more neutral territory. Valuations are at or slightly above historical averages, but we need to see earnings growth reaccelerate. We expect a higher level of volatility as markets assess the impact of slower global growth and actions of policymakers; but our view on risk assets still tilts positive over the near term. Higher volatility has led to attractive pockets of opportunity we can take advantage of as active managers.

Source: Brinker Capital. Views expressed are for informational purposes only. Holdings subject to change. Not all asset classes referenced in this material may be represented in your portfolio. All investments involve risk including loss of principal. Fixed income investments are subject to interest rate and credit risk. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting. Brinker Capital Inc., a Registered Investment Advisor.

April 2016 Monthly Market And Economic Outlook

Amy MagnottaAmy Magnotta, CFASenior Investment Manager, Brinker Capital

After an extremely volatile quarter, the broad equity market indexes ended just about where they started. Risk assets began the year under heavy pressure, with the S&P 500 Index declining more than -10% to a 22-month low on February 11. Concerns over the global growth outlook and the impact of further weakness in crude oil prices weighed on investors, and investor sentiment hit levels of extreme pessimism. Then we experienced a major reversal beginning on February 12, helped by a rebound in oil prices after Saudi Arabia and Russia agreed to freeze production, and more dovish comments by the Federal Reserve. Expectations regarding the pace of additional rate hikes by the Fed have been tempered from where they started the year.

All U.S. equity sectors ended the quarter in positive territory except for healthcare and financials. Dividend paying stocks significantly outperformed, resulting in a strong quarter for both the telecom and utilities sectors, and value indexes overall. From a market capitalization perspective, mid-caps outperformed both large and small caps, helped by the strong performance of REITs, another yield-oriented asset class.

Developed international equity markets lagged U.S. equity markets in the first quarter despite benefiting from a weaker U.S. dollar. Japan and Europe were particularly weak despite additional easing moves by their central banks, while the commodity-sensitive countries, such as Canada and Australia were positive for the quarter. Emerging markets outperformed U.S. equity markets for the quarter despite declines in China and India. Brazil was the strongest performer, helped by a rebound in the currency, expectations for political change, and the bounce in commodity prices.

ECBBonds outperformed stocks during the quarter, and did not even decline during the risk-on rally. Additional easing from the European Central Bank and a negative interest rate policy in Japan prevented U.S. bond yields from moving higher.

All fixed income sectors were positive for the quarter, led by corporate credit, which benefited from meaningful spread tightening, and TIPS, which benefited from their longer duration. Municipal bonds delivered positive returns, but lagged taxable fixed income.

We remain positive on risk assets over the intermediate-term; however, we acknowledge that we are in the later innings of the bull market that began in 2009 and the second half of the business cycle. The worst equity market declines are typically associated with recessions, which are preceded by aggressive central bank tightening or accelerating inflation, factors which are not present today. While our macro outlook is biased in favor of the positives and a near-term end to the business cycle is not our base case, the risks must not be ignored.

A number of factors we find supportive of the economy and markets over the near term.

  • Global monetary policy remains accommodative: Despite the Federal Reserve beginning to normalize monetary policy with a first rate hike in December, their approach is patient and data dependent. The Bank of Japan and the ECB have been more aggressive with easing measures in an attempt to support their economies, and China is likely going to require additional support.
  • Stable U.S. growth and tame inflation: U.S. economic growth has been modest but steady. Payroll employment growth has been solid and the unemployment rate has fallen to 5.0%. Wage growth has been tepid at best despite the tightening labor market, and reported inflation measures and inflation expectations, while off the lows, remain below the Fed’s target.
  • U.S. fiscal policy more accommodative: With the new budget fiscal policy is poised to become modestly accommodative in 2016, helping offset more restrictive monetary policy.
  • Solid backdrop for U.S. consumer: The U.S. consumer should see benefits from lower energy prices and a stronger labor market.

However, risks facing the economy and markets remain, including:

  • Risk of policy mistake: The potential for a policy mistake by the Fed or another major central bank is a concern, and central bank communication will be key. In the U.S. the subsequent path of rates is uncertain and may not be in line with market expectations, which could lead to increased volatility. Negative interest rates are already prevalent in other developed market economies.
  • Slower global growth: Economic growth outside the U.S. is decidedly weaker, and a significant slowdown in China is a concern.
  • Another downturn in commodity prices: Oil prices have rebounded off of the recent lows and lower energy prices on the whole benefit the consumer; however, another significant leg down in prices could become destabilizing.
  • Further weakness in credit markets: While high yield credit spreads have tightened from February’s wide levels, further weakness would signal concern regarding risk assets more broadly.

The technical backdrop of the market has improved, as have credit conditions, while the macroeconomic environment remains favorable. Investor sentiment moved from extreme pessimism levels in early 2016 back into more neutral territory. Valuations are at or slightly above historical averages, but we need to see earnings growth reaccelerate. We expect a higher level of volatility as markets assess the impact of slower global growth and actions of policymakers; however, our view on risk assets tilts positive over the near term. Higher volatility has led to attractive pockets of opportunity we can take advantage of as active managers.

Source: Brinker Capital. Views expressed are for informational purposes only. Holdings subject to change. Not all asset classes referenced in this material may be represented in your portfolio. All investments involve risk including loss of principal. Fixed income investments are subject to interest rate and credit risk. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting. Brinker Capital Inc., a Registered Investment Advisor.

March 2016 Monthly Market And Economic Outlook

Amy MagnottaAmy Magnotta, CFASenior Investment Manager, Brinker Capital

February was a fragmented month. Equity markets were down mid- to high-single-digits for the first half of the month but rebounded off the February 11 bottom to end the month relatively flat. While fears of slower growth in U.S. and China as well as volatile oil prices continued to serve as negative catalysts to equity markets in the beginning of the month, positive reports of strong consumer spending and  employment as well as signs of stabilization in oil prices helped dissipate fears. In response, the market rallied during the second half of the month, finishing in neutral territory.

The S&P 500 Index ended slightly negative with a return of -0.1% for February. Sector performance was mixed with more defensive sectors – telecom, utilities and consumer staples – posting positive returns. Underperformance of health care and technology sectors caused growth to lag value for the month. Small caps continued to lag large caps, and micro caps had a particularly challenging month, underperforming all market caps.

International equity markets lagged U.S. markets in both local and in U.S. dollar terms for the month. Weak economic data coupled with concerns over the effectiveness of monetary policy response in both Europe and Japan caused investor confidence to drop, negatively impacting developed international markets. Emerging markets were relatively flat on the month, remaining ahead of developed international markets as these export heavy countries benefited from more stable currencies and an upturn in oil prices.

U.S. Treasury yields continued to fall in the beginning of the month, bottoming at 1.66%, before bouncing back to end the month at 1.74% as equities rebounded. The yield curve marginally flattened during the month. All investment grade sectors were positive for the month and municipal bonds also posted a small gain. High yield credit gained 0.6% as spreads contracted 113 basis points after reaching a high of 839 basis points on February 11th. We remain positive on this asset class due to the underlying fundamentals and attractive absolute yields.

We remain positive on risk assets over the intermediate-term as we believe we remain in a correction period rather than the start of a bear market. The worst equity market declines are typically associated with recessions, which are preceded by aggressive central bank tightening or accelerating inflation, factors we do not believe are present today. However, we acknowledge that we are in the later innings of the bull market that began in 2009 and the second half of the business cycle, and, while a recession is not our base case, the risks must not be ignored.

A number of factors we find supportive of the economy and markets over the near term.

  • Global monetary policy accommodation: Despite the Federal Reserve beginning to normalize monetary policy with a first rate hike in December, their approach should be patient and data dependent.  More signs point to the Fed delaying the next rate hike in March. The Bank of Japan and the ECB have been more aggressive with easing measures in an attempt to support their economies, and China is likely going to require additional support.
  • U.S. growth stable and inflation tame: U.S. economic growth has been modest but steady. GDP estimates are running at 2.2% for the first quarter (Source: Federal Reserve Bank of Atlanta). Payroll employment growth has been solid and the unemployment rate has fallen to 4.9%. Wage growth has been tepid at best despite the tightening labor market, and reported inflation measures and inflation expectations, while off the lows, remain below the Fed’s target.
  • Washington: The new budget fiscal policy is poised to become modestly accommodative, helping offset more restrictive monetary policy.vola

However, risks facing the economy and markets remain, including:

  • Policy mistake: The potential for a policy mistake by the Fed or another major central bank is a concern, and central bank communication will be key. In the U.S. the subsequent path of rates is uncertain and may not be in line with market expectations, which could lead to increased volatility.
  • Slower global growth: Economic growth outside the U.S. is decidedly weaker, and a significant slowdown in China is a concern.
  • Wider credit spreads: While overall credit conditions are still accommodative, high yield credit spreads remain wide, and weakness is widespread.
  • Another downturn in commodity prices: Oil prices have rebounded off of the recent lows; however, another significant leg down in prices could become destabilizing.

On the balance, the technical backdrop of the market remains on the weaker side, but valuations are at more neutral levels. We expect a higher level of volatility as markets digest the Fed’s actions and assess the impact of slower global growth; however, our view on risk assets tilts positive over the near term. Higher volatility has led to attractive pockets of opportunity that as active managers we can take advantage of.

Source: Brinker Capital. Views expressed are for informational purposes only. Holdings subject to change. Not all asset classes referenced in this material may be represented in your portfolio. All investments involve risk including loss of principal. Fixed income investments are subject to interest rate and credit risk. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting. Brinker Capital Inc., a Registered Investment Advisor.