Investment Insights Podcast: November 2018 market and economic outlook

Leigh Lowman, CFA, Investment Manager

On this week’s podcast (recorded November 9, 2018), Leigh provides a brief review of the October markets.

 

Quick hits:

  • It was a rough start to the fourth quarter as increasing concerns over the “wall of worry” led to risk assets suffering a sharp drawdown in October.
  • Despite these negatives, US fundamentals remained solid with third quarter US real GDP growth coming in at 3.5% and unemployment at a record low.
  • The S&P 500 Index was down -6.8% for the month, bringing the year to date gain down to 3.0%
  • Developed international equities, as measured by the MSCI EAFE Index, were down -8.0% for the month and -8.9% year to date.
  • The Bloomberg Barclays US Aggregate Index was down -0.8% for the month and is down -2.4% year to date.
  • Despite the October sell-off in equity markets, we remain positive on risk assets over the intermediate term.

Listen_Icon  Listen to the abbreviated audio recording.

Read_Icon  Read the full November Market and Economic Outlook.

 

market outlook (11)

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.

 

Vlog – Putting pullbacks in perspective

Tim Holland, Brinker Capital’s Global Investment Strategist, discusses the importance of putting near-term market performance in perspective before, as always, pivoting back to the fundamentals (recorded November 1, 2018).

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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.

A quick take on the mid-term elections

Raupp_F_150x150Jeff Raupp, CFA, Chief Investment Officer

The 2018 mid-term elections were one of the most highly-anticipated mid-terms in recent history. As we digest the results and understand the new landscape, here are some initial thoughts on the potential impacts to the markets.

Uncertainty is reduced and that’s a positive for markets. Part of our rationale for cutting our risk weighting in September was that elections tend to bring uncertainty, and markets dislike uncertainty. While a few individual elections are still up in the air, we know we have a Republican-led Senate and a Democrat-led House. Since 1950, the S&P 500 Index had a positive return in every 12-month period following a mid-term election (17 straight periods!), with an average return of over 15%. Reducing uncertainty is a powerful force.

Both sides will claim victory. Democrats took the House, Republicans expanded their margin in the Senate. From a fiscal policy perspective, this looks to be a neutral outcome. For example, tax reform is unlikely to be rolled back, but also unlikely to be expanded.

There is potential for some compromise. Nancy Pelosi has traditionally believed in results over resistance, and many of the new Democratic House members lean moderate. There are a lot of variables here, but we may have some compromise over gridlock.

The biggest risk seems to be raising the debt ceiling in 2019. The Democrats biggest leverage point will be the debt ceiling vote in early 2019. In 2011, Republicans used that to gain concessions from President Obama to reduce spending. Early indications are that Democrats won’t go the route of brinksmanship, but it’s something we’ll watch.

Headline risks may increase. The Mueller investigation, changes at the SEC, oil and gas production/pipelines and more are potential headline initiatives, more likely noise with regard to the broader markets than anything larger.

Trade and fundamentals likely to take a leading role for markets. Softening of the trade rhetoric with China has been the primary cause of the 5+% bounce over the last week or so. The White House has recognized that, with President Trump’s re-election in 2020 now on the horizon, we would expect progress in 2019, albeit not linear progress. And, 3Q earnings are now projected to increase over 28% year-over-year. While concerns of peak earnings growth are probably founded, on an absolute level earnings should continue to be strong in 2019. As a result, we’ve seen stock valuations come down to levels below their 20-year average. In addition, economic growth continues to be solid and capital expenditures have been moving higher as corporations are putting their extra cash to work.

Brinker Capital’s Investment Committee continually monitors market conditions and follows a structured process for implementing decisions.  We employ a dynamic asset allocation approach that complements our long-term strategic allocation with active asset allocation shifts.  The active shifts are based on short- and intermediate-term macro views and enable our portfolio managers to take advantage of potential market opportunities and reduce exposure to potential risks, while staying aligned with portfolio objectives.

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.

Investment Insights Podcast: Unpleasant, yes; deterioration in fundamentals, no

Amy Magnotta, CFASenior Vice President, Brinker Capital

On this week’s podcast (recorded October 26, 2018), Amy discusses the recent market volatility.

Quick hits:

  • The S&P 500 Index is down -7.6% from its September high, but has not yet reached official correction status.
  • Third quarter earnings have been stellar for the most part.
  • Investors have a number of concerns that are weighing on markets.
  • We continue to believe that the positives outweigh the risks, and we do not see that a recession is imminent.

For Amy’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.

A tomorrow more certain than today?

Crosby_2015-150x150Dr. Daniel Crosby Executive Director, The Center for Outcomes & Founder, Nocturne Capital

Suppose I asked you what you would be doing in 5 minutes. Odds are, you would be able to answer that question with some high degree of certainty. After all, it will probably look a bit like what you are doing at the time you were asked. Now, let’s move the goalpost back a bit and imagine that I asked you what you would be doing five weeks from now. It would certainly be exponentially harder to pinpoint, but your calendar may give some clues as to how you will be engaged at that time. Now imagine you were asked to forecast your actions five months, five years, or even fifty years from now – damn near impossible, right? Of course, it is because, in our quotidian existence, the present is far more knowable than the distant future.

What complicates investing then, is that the exact reverse is true. We have no idea what will happen today, very little notion of what next week holds, a slight inkling as to potential one-year returns but could take a pretty solid stab at 30 years from now. Consider the long-term performance of stocks by holding periods:a tomorrow more certain than today

Over short periods of time, returns are nearly unknowable. Stocks are up about 60 percent of the time and down about 40 percent of the time, but the highs and lows are both very dramatic. Over a period more reflective of a long-term investment horizon, however, the future becomes far more certain. Returns average just over 10 percent per year, with the worst case being around 6 percent and the best case being nearly 15 percent. Not so scary anymore, but it does require a fundamental rethinking of reality, something that seems not to be happening. As statistician extraordinaire Nate Silver says in The Signal and the Noise:

“In the 1950s, the average share of common stock in an American company was held for about six years before being traded – consistent with the idea that stocks are a long-term investment. By the 2000s, the velocity of trading had increased roughly twelvefold. Instead of being held for six years, the same share of stock was traded after just six months. The trend shows few signs of abating: stock market volumes have been doubling once every four or five years.”

Intuition tells us that “now” is more knowable than “tomorrow” but Wall Street Bizarro World (WSBW) says otherwise. As Silver points out, more access to data and the disintermediary effects of technology make our tendency toward short-termism even greater. But the growing impatience of the masses only serves to benefit the savvy investor. As Ben Carlson says in A Wealth of Common Sense, “Individuals have to understand that no matter what innovations we see in the financial industry, patience will always be the great equalizer in financial markets. There’s no way to arbitrage good behavior over a long-time horizon. In fact, one of the biggest advantages individuals have over the pros is the ability to be patient.”

The Center for Outcomes, powered by Brinker Capital, has prepared a system to help advisors employ the value of behavioral alpha across all aspects of their work – from business development to client service and retention. To learn more about The Center for Outcomes and Brinker Capital, call us at 800.333.4573.

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.

 

Investment Insights Podcast: October 2018 market and economic outlook

Leigh Lowman, CFA, Investment Manager

On this week’s podcast (recorded October 12, 2018), Leigh provides a brief review of the third quarter markets.

 

Quick hits:

  • Risk assets were mixed for the third quarter with domestic equities outperforming international equities by a large margin.
  • Despite what historically is a challenging quarter from a seasonality perspective, a strong macroeconomic backdrop triggered robust growth within US equities.
  • The S&P 500 Index was up 7.2% for the quarter with all sectors posting positive returns and year-to-date is up 10.6%.
  • Developed international equities, as measured by the MSCI EAFE Index, were up 1.4% for the quarter and down -1.0% year-to-date.
  • The Bloomberg Barclays US Aggregate Index was flat for the quarter and down -1.6% year-to-date.
  • We remain positive on risk assets over the intermediate term, although we acknowledge we are in the later innings of the bull market and the second half of the business cycle.

Listen_Icon  Listen to the abbreviated audio recording.

Read_Icon  Read the full October Market and Economic Outlook.

 

market outlook (oct18)

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.

 

Vlog – Quarter End Q&A: 3Q2018

Brinker Capital’s Global Investment Strategist, Tim Holland, asks and answers those questions we think will be top of mind for clients as they open their quarterly statements and think back on the quarter that was:

  1. Can this record bull market continue to run?
  2. Will weakness in emerging market equities spark a bear market here at home?
  3. Will the Fed continue to raise rates and what might that mean for the economy?

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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.

Making sense of recent market volatility

This past week has been a very unsettling time for markets and investors. To help inform conversations, Jeff Raupp, CFA, Brinker Capital’s CIO, recorded a podcast that examines the recent market correction, including the catalyst for the sell-off and where we see the market heading into 2019.

Additionally, Dr. Daniel Crosby, Executive Director, The Center for Outcomes & Founder, Nocturne Capital, provides information to better understand market volatility and how to best react to the changes:

We hope you find these tools helpful and appreciate your continued confidence in Brinker Capital.

Brinker Capital, Inc., a registered investment advisor.

Vlog – The markets vs. the mid-terms

Tim Holland, Brinker Capital’s Global Investment Strategist, discusses the upcoming Congressional mid-term elections, specifically what party will win the House and the Senate, and how markets might respond once the votes are counted.

 

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: September 2018 market and economic outlook

Leigh Lowman, CFA, Investment Manager

On this week’s podcast (recorded September 7, 2018), Leigh provides a brief review of August markets.

 

Quick hits:

  • Despite what historically is a difficult month for markets, US equities finished in strong positive territory and a new record was set for the longest bull market in history.
  • The S&P 500 Index was up 3.3% for the month and has gained 9.9% year to date.
  • Developed international equities as measured by the MSCI EAFE Index were down -1.9% for the month and -1.9% year to date.
  • Emerging Markets Index was down -2.7% for the month and -6.9% year to date.
  • The Bloomberg Barclays US Aggregate Index was up 0.6% for the month with all sectors posting positive returns.
  • The 10-year Treasury yield declined 12 basis points, ending the month at 2.85%, and led to further flattening of the yield curve.

Listen_Icon  Listen to the abbreviated audio recording.

Read_Icon  Read the full August Market and Economic Outlook.

 

market outlook Sept 2018

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.