Investment Insights Podcast: A review of November markets

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Leigh Lowman, CFA, Investment Manager

On this week’s podcast (recorded December 8, 2017), Leigh provides a quick review of October markets.

 

Quick hits:

  • After a short pause in the beginning of the month, it was more of the same for equity markets as the investment themes that have been apparent for most of the year were again evident throughout November.
  • The S&P 500 Index was up 3.1% in November.
  • Developed international equities were up 1.1%, underperforming domestic equities for the second month in a row.
  • Emerging markets were up 0.2% for November.
  • Fixed income was down in November with most sectors posting negative returns.

Listen_Icon  Listen to the audio recording.

Read_Icon  Read the full October Market and Economic Outlook.

 

market outlook

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: Oil bounces back

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

On this week’s podcast (recorded December 1, 2017), Tim discusses what’s been pushing the commodity higher and, maybe more importantly, where the price of crude goes from here.

Quick hits:

  • Two primary factors are driving the rally in the price of oil, and from an economics perspective they are the classics: supply and demand.
  • Facing greater demand and reduced supply, are we worried that the price of crude will continue to move up?  Our short answer, is no.
  • Looking out over the next year or so, we believe the price of oil will be range bound, with a lower band around $40 a barrel and an upper band around $60 a barrel.

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: When will the next recession hit?

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

On this week’s podcast (recorded November 20, 2017), Tim takes a closer look at the somewhat unpleasant topic of Recession — including what causes them and when the next one might hit.

Quick hits:

  • There are three historic catalysts for a recession: The Federal Reserve, a bursting bubble, and an exogenous shock.
  • When will the next recession hit? The short answer? Not now.
  • Interest rates remain at reasonable levels, corporate revenues and earnings are growing, unemployment claims and the unemployment rate are at historic lows, and consumers and corporations have ample access to credit.

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: A review of October markets

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Leigh Lowman, CFA, Investment Manager

On this week’s podcast (recorded November 10, 2017), Leigh provides a quick review of October markets.

 

Quick hits:

  • Many of the global growth themes that were evident in the third quarter carried into the start of the fourth quarter.
  • Macroeconomic data remained positive and earnings announcements generally came in above analyst forecasts.
  • Our base case remains that the positive market momentum we have seen year-to-date will likely continue through year-end.
  • However, we are aware that with equity markets at record highs and volatility at record lows, this may indicate investor sentiment is reaching excessive levels.

Listen_Icon  Listen to the audio recording.

Read_Icon  Read the full October Market and Economic Outlook.

 

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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: Are you familiar with the expression, “Don’t fight the tape?”

Chris HartHart_Podcast_338x284Senior Vice President

On this week’s podcast (recorded November 3, 2017), Chris highlights some of the more interesting facts that he has come across in recent days from various sources that support the notion of “don’t fight the tape.”.

 

Quick hits:

  • With October complete, the S&P 500 is up more than 15% for the year.  According to our research partners at Strategas, this has only happened 17 times since 1950, and usually indicates continued market strength through the end of the year.
  • A seasonally strong fourth quarter looks even more attractive and helps further confirm our constructive outlook for risk assets for the remainder of 2017.
  • Our partners at Evercore ISI point out that with more than 50% of S&P companies reporting, results have been above analyst expectations.
  • What’s more interesting is that the earnings beats have been skewed more positive than normal.
  • Our outlook remains constructive supported by strong economic data.

For the rest of Chris’s insight, 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: Who is the next Fed Chair?

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

On this week’s podcast (recorded October 30, 2017), Tim discusses who President Trump might announce as his nominee for Chair of the Board of Governors of the Federal Reserve System.

Quick hits:

  • The three leading candidates seem to be Fed Governor Jerome Powell, Stanford Professor John Taylor and Chairwoman Yellen.
  • While any prediction tied to the Trump Administration comes with a heightened level of risk, we believe Mr. Powell will be chosen by the President to serve as the next Fed Chair.
  • If Mr. Powell does become the next Fed Chair, we don’t expect much of a change near-term concerning U.S. monetary policy.

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: Markets only go up until they don’t

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Andrew Goins
, Investment Manager

On this week’s podcast (recorded October 20, 2017), Andrew revisits Black Monday, the largest single day market decline in history. He provides commentary on the measures taken after the crash and where the market currently stands today.

Quick hits:Last week, we celebrated the 30th anniversary of Black Monday, when on October 19th, 1987 the Dow Jones Industrial Average declined 22.6%.

  • As we look to today, with only one negative quarter for the S&P 500 in the last 4 and a half years, it’s easy to forget that circuit breakers exist and that markets can correct and even crash.
  • The Dow Jones closed above 23,000 for the first time last Wednesday and ended the week even higher.

For Andrew’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: Harvey & Irma upend the jobs market

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

On this week’s podcast (recorded October 13, 2017), Tim discusses why the jobs market turned south after seven years of net job growth, and if the disappointing September report is a harbinger of a weakening economy or possibly even a recession.

Quick hits:

  • According to the Department of Labor, the U.S. lost 33,000 jobs in September, marking the first month in seven years that the labor market failed to expand.
  • One can assume Harvey and Irma had a significant – and temporary – impact on the jobs market.
  • While Hurricanes Harvey and Irma were tragic events, we don’t see them having a lasting, negative impact on the economy, which remains on very firm footing.

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: A review of September markets

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Leigh Lowman, CFA, Investment Manager

On this week’s podcast (recorded October 9, 2017), Leigh provides a quick review of September markets.

 

Quick hits:

  • In September, more clarity surrounding anticipated tax reform policies helped boost consumer and business sentiment and there is now a higher probability that corporate tax cuts and/or move to a territorial tax system will be enacted in the beginning of 2018.
  • Overall macroeconomic data leans positive and we expect the positive market momentum we have seen so far in 2017 will carry through to the end of the year.
  • We remain positive on risk assets over the intermediate-term but recognize we are in the later innings of the bull market.

Listen_Icon  Listen to the audio recording.

Read_Icon  Read the full October Market and Economic Outlook.

 

 

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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.

 

No apologies needed – The Diversification Apology Index

Rosenberger 150 x 150Andrew Rosenberger, CFA, Senior Investment Manager

Being truly diversified means always having to apologize for something.  Diversification, like investing in general, is oftentimes easier said than done.  We can theorize about 30 year time horizons; but emotions, herd mentality, individual circumstances, and a largely unpredictable future make practice far more difficult than theory.  For example, prior to the Financial Crisis when international stocks were ripping higher, investors questioned why more of their equity exposure wasn’t allocated toward international and emerging market stocks.  Last year, clients questioned why any of their equity exposure was allocated toward international companies.  As diversified asset allocators, we are constantly facing something in our portfolios which is lagging the broader markets.

With that said, 2017 certainly “feels” like it is shaping up to be a good year for diversified investors.  Most asset classes are up on the year with select ones, like international equities, handily outperforming the S&P 500.  But why does this year “feel” different than those in the past?  To answer that, let me introduce the “Diversification Apology Index.”

Diversification Apology Index 2

Source: Brinker Capital, FactSet, Lipper: 1/1/05 to 8/31/17

To explain further, let me first mention that not everything is performing well this year.  Commodities are slightly negative year-to-date, while REITs cling to only fractionally positive returns.  Yet, when you look at most investors’ portfolios, commodities and REITs make up only a minor portion of their overall asset allocation.  International equities, on the other hand, tend to represent a much larger investable universe and thus tend to make up a more significant portion of a diversified asset allocation.  To demonstrate this idea, we complied all U.S. open-end mutual funds and grouped them into broad asset classes based on their Lipper classifications.  With the entire mutual fund universe in hand, we then asset weighted each fund according to its corresponding asset class.  In short, we created a proxy for the ‘market portfolio.’  While we don’t believe this represents the average investors’ asset allocation per-se, it does give us some indication on relative positioning.  For example, we can see that the assets under management (AUM) for the international and global equity mutual funds is nearly twice as large as that of commodities, natural resources and MLPs.  Similarly, REITs make up only 3 percent of the total mutual fund AUM.  Although investors will differ based on their risk tolerance, objectives, biases, and investment philosophy, the aggregate mutual fund AUM provides some insight as to where the investors tend to allocate their investable capital.

US Mutual Fund Universe by Asset Class 2

Source: Brinker Capital, FactSet, Lipper: as of 6/30/17

With an idea relative asset class weightings, we can then compare recent performance of each of these asset classes to how a very traditional 60 percent S&P 500, 40 percent Barclays Aggregate portfolio would perform.  When asset classes with relatively small weights underperform, investors tend not to take all that much notice.  Hence, there is little to ‘apologize’ for.  However, when more meaningfully weighted asset classes underperform, the results stand out like a sore thumb.

Therein lies the basic methodology for the “Diversification Apology Index”.  After staying in an elevated range since 2011, we now see the benefits of diversification more similar to that of before the Financial Crisis.  Although we shouldn’t interpret this gauge as having any predictive power, it does bring hope that conversations with investors will be more focused on goals and how to meet objectives rather than why one may not be keeping up with the S&P 500.  Ultimately though, we should take comfort in knowing that it’s a good thing when select asset classes underperform, as it means that we are truly benefiting from a diversified portfolio.

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