Vlog – Trade wars are bad for business; Fortunately, we aren’t in one, yet

Brinker Capital’s Global Investment Strategist, Tim Holland, provides perspective on the Trump Administration’s tariff announcement.

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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: Fiscal policy takes the baton from monetary policy – What it means for the economy & risk assets

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

On this week’s podcast (recorded February 23, 2018), Tim takes a closer look at US fiscal policy and how it might impact the economy and markets as we move through 2018.

Quick hits:

  • For now, we see fiscal policy as a net positive for economic growth and risk assets, particularly equities.
  • We also don’t see interest rates and inflation as a risk to the economy and markets.
  • We do think rates are biased higher, which is one reason we are conservatively positioned within fixed income.
  • Increased investor concern over higher rates and inflation is driving greater market volatility, something we all lived through earlier this month.

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.

Introducing Brinker Capital RIA Services

Marino_R 150 x 150Roddy Marino, CIMAExecutive Vice President
National Accounts & Distribution

For 30 years, Brinker Capital has helped advisors provide better outcomes for their clients. Building on that track record, we are thrilled to announce the launch of Brinker Capital RIA Services. This recently established division focuses on better serving RIAs, who are experiencing rapid growth by bringing together like-minded partners, a fully-digital platform, and a team of experienced professionals to support the business.

In the video below, Brendan McConnell, Chief Operating Officer, discusses Brinker Capital RIA Services with Matt Ackerman of InvestmentNews and the reasons behind the launch.

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To learn more about Brinker Capital RIA Services, register for a webinar on Wednesday, February 21 at 4 PM ET. Frank Pizzichillo, Managing Director, RIA Platform Services, and I will discuss the guided and open-architecture investment solutions; multi-custodial flexibility; proposal and reporting technology; and the dedicated support team.

Brinker Capital is a privately held investment management firm with $21.7 billion in assets under management (as of December 31, 2017). For 30 years, Brinker Capital’s purpose has been to deliver an institutional multi-asset class investment experience to individual clients. Brinker Capital’s highly strategic, disciplined approach has provided investors the potential to achieve their long-term goals while controlling risk. With a focus on wealth creation and management, Brinker Capital serves financial advisors and their clients by providing high-quality investment manager due diligence, asset allocation, portfolio construction, and client communication services.

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.

Vlog – Market volatility: It’s back! Why? And what comes next?

Brinker Capital’s Global Investment Strategist, Tim Holland, provides perspective around recent market volatility, what triggered it and what impact it’s having on our thinking and portfolio positioning.

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.

February 2018 market and economic outlook

Lowman_FLeigh Lowman, CFA, Investment Manager

Despite the pick-up in volatility at the end of January, risk assets continued their upward ascent throughout the month. Expectations surrounding the implementation of the newly passed tax reform bill and the weakening US dollar served as positive catalysts for the month. Macroeconomic data was mixed; fourth quarter real GDP growth came in slightly below expectations but manufacturing activity accelerated and the US jobs report was positive. Although we have seen initial signs of rising inflation, levels remain subdued as low unemployment has yet to translate into meaningful wage growth. We expect the Federal Reserve (Fed) to remain on track with interest rate normalization and the positive, albeit choppy, market momentum we have seen to date indicates that markets can likely withstand an additional Fed rate hike in March.

The S&P 500 Index was up 5.7% for the month with cyclicals outperforming defensive sectors. Consumer discretionary (+9.3%) led while tax cuts and a solid job market served as positive catalysts. Information technology (+7.6%) and financials (+6.5%) also posted strong returns for the month. Utilities (-3.1%) and REITs (-2.0%) were down as traditional bond proxy sectors experienced headwinds amidst rising interest rates. Growth outperformed value and large-cap outperformed both mid-cap and small-cap equities.

Developed international equities (+5.0%) performed in line with domestic equities. Fundamentals within the Eurozone continued to improve and sentiment is high. The focus remains on European Central Bank policy and how the reduction of its quantitative easing purchases will impact markets. Emerging markets were up 8.3%. A weaker dollar and stronger demand for commodities served as tailwinds for both emerging Asia and Latin America regions.

Feb. 2018 Market Outlook

The Bloomberg Barclays US Aggregate Index was down -1.2% for the month. Interest rates surged with 10-year Treasury yields increasing 31 basis points, ending the month at 2.7%. Tightening monetary policy and improving US growth expectations will likely continue to put upward pressure on the long end of the yield curve. High yield was the only sector to post positive returns in January, as credit spreads continued to grind tighter. Like taxable bonds, municipals were negative for the month.

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. While this cycle has been longer in duration compared to history, the recovery we have experienced has been muted, supported by the extended recovery period. While our macro outlook is biased in favor of the positives, the risks must not be ignored.

We find a number of factors supportive of the economy and markets over the near-term.

  • Pro-growth policies of the Administration: The Trump administration has delivered a new tax plan and a more benign regulatory environment. We could see additional government spending on infrastructure in 2018.
  • Synchronized global economic growth: Growth in the US has started to accelerate, and growth in both developed international and emerging economies has meaningfully improved. The tax cuts could also help to boost GDP growth in 2018.
  • Improvement in earnings growth: Corporate earnings growth has improved globally and corporate tax reform should further benefit US-based companies.
  • Elevated business sentiment: Measures like CEO Confidence and NFIB Small Business Optimism are at elevated levels. This typically leads to additional project spending and hiring, which should boost growth. The corporate tax cut should also benefit business confidence and lead to increased capital spending.

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

  • Fed tightening: The Fed will continue to tighten monetary policy, with at least three interest rate hikes priced in for 2018. We may see tightening from other global central banks as well.
  • Higher inflation: Current levels of inflation are muted but inflation expectations have ticked higher and the reflationary policies of the Administration could further boost levels. Should inflation move higher, the Fed may shift to a more aggressive tightening stance.
  • Geopolitical risks: Geopolitical risks including trade policies and global challenges could cause short-term market volatility.

Despite the volatility experienced over the last week, the technical backdrop of the market remains favorable, credit conditions are supportive, and global economic growth is accelerating. So far President Trump’s policies are being seen as pro-growth, and business and consumer confidence are elevated. The onset of new policies under the Trump administration and actions of central banks may lead to higher volatility, but our view on risk assets remains positive over the intermediate-term. Higher volatility can lead to attractive pockets of opportunity we can take advantage of as active managers.

Brinker Capital Barometer (as of 1/5/18)

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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. Indices are unmanaged and an investor cannot invest directly in an index. 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. S&P 500: An index consisting of 500 stocks chosen for market size, liquidity, and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of US equities and is meant to reflect the risk/return characteristics of the large-cap universe. Companies included in the Index are selected by the S&P Index Committee, a team of analysts and economists at Standard & Poor’s. Bloomberg Barclays US Aggregate: A market capitalization-weighted index, maintained by Bloomberg Barclays, and is often used to represent investment grade bonds being traded in United States.

 

The do’s and don’ts for periods of market volatility

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

We know it has been a stressful week for everyone involved in the market. In times like this, knowing what not to do is just as important as knowing what to do. Therefore, we created a list of things you should and shouldn’t be doing in periods of market volatility.

Do:

  • Do know your history
    • Despite what political pundits and TV commentators would have you believe, this is not an unusually scary time to be alive. Although you would never know it from watching cable, the economy is growing and most quality of life statistics have been headed in the right direction for years! Markets always have and always will climb a wall of worry, rewarding those who stay the course and punishing those who succumb to fear. Warren Buffet expressed this beautifully when he said, “In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shock; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.” Such it has ever been, thus will it ever be.
  • Do take responsibility
    • Which of the following do you think is most predictive of financial performance: a) market timing b) investment returns or c) financial behavior? Ask most men or women on the street and they are likely to tell you that timing and returns are the biggest drivers of financial performance, but the research tells you another story. In fact, the research says that you – that’s right – you, are the best friend and the worst enemy of your own portfolio. What happens in the financial markets in the coming years is absolutely out of your control. But, your ability to follow a plan, diversify across asset classes, and maintain your composure is squarely within your own power. At times when market moves can feel haphazard, it helps to remember who is really in charge.
  • Do work with a professional
    • Odds are that when you chose your financial advisor, you selected him or her because of his or her academic pedigree, years of experience, or a sound investment philosophy. Ironically, what you likely overlooked entirely is the largest value he or she adds – managing your behavior. Studies from across the industry put the added value from working with an advisor at 2 to 3% per year. Compound that effect over a lifetime and the power of financial advice quickly becomes evident.

Don’t:

  • Don’t equate risk with volatility
    • Repeat after me, “volatility does not equal risk.” Risk is the likelihood that you will not have the money you need at the time you need it to live the life you want to live. Nothing more, nothing less. Paper losses are not “risk” and neither are the gyrations of a volatile market.
  • Don’t focus on the minute-to-minute
    • Despite the enormous wealth-creating power of the market, looking at it too closely can be terrifying. A daily look at portfolio values means you see a loss 46.7% of the time, whereas a yearly look shows a loss merely 27.6% of the time. Limited looking leads to increase feelings of security and improved decision-making.
  • Don’t give into action bias
    • At most times and in most situations, increased effort leads to improved outcomes. Want to lose weight? Start running. Want to learn a new skill set? Go back to school. Investing is that rare world where doing less actually gets you more. James O’Shaughnessy of “What Works on Wall Street” relates an illustrative story of a study done at Fidelity. When they surveyed their accounts to see which had done best, they uncovered something counterintuitive: the best-performing stocks were those that had been forgotten entirely.

The Center for Outcomes, powered by Brinker Capital Holdings, has developed an educational program 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.

Brinker Capital is a privately held investment management firm with $21.7 billion in assets under management (as of December 31, 2017). For 30 years, Brinker Capital’s purpose has been to deliver an institutional multi-asset class investment experience to individual clients. Brinker Capital’s highly strategic, disciplined approach has provided investors the potential to achieve their long-term goals while controlling risk. With a focus on wealth creation and management, Brinker Capital serves financial advisors and their clients by providing high-quality investment manager due diligence, asset allocation, portfolio construction, and client communication services. Brinker Capital, Inc. is a registered investment advisor.

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: The yield curve – What is it and why does it matter?

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

On this week’s podcast (recorded January 26, 2018), Tim discusses a topic that’s been receiving significant attention from the media and investors, and that’s the yield curve.

 

Quick hits:

  • The yield curve is simply the spread or difference between the yield on the 10-year US Treasury Note and the 2-year US Treasury Note.
  • Usually, our economy is expanding and the yield curve is positively sloped.
  • Two forces typically cause the yield curve to flatten or invert: 1. the Federal Reserve raising the Fed Funds Rate, and 2. when investors continue to invest in the long end of the yield curve.
  • The yield curve has been flattening of late. So do we at Brinker think it might be signaling a recession?

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.

Brinker Capital at FSI OneVoice 2018 in Dallas, TX

beaman 150 x 150Noreen D. BeamanChief Executive Officer

For the fifth year in a row, Brinker Capital is proud to be a Premier Sponsor of the Financial Services Institute OneVoice conference. This annual meeting provides meaningful education and networking opportunities for members of the independent broker-dealers we serve. The Financial Services Institute is important to the future of our industry as they continually advocate for a healthier, more business-friendly regulatory environment for independent financial services firms and independent financial advisors.

At the 2018 OneVoice event, we are pleased to be a part of the Advancing Women in Leadership Luncheon, a pre-conference workshop being held on Monday, January 29. At Brinker Capital, we believe creating an environment for professional development and networking for women in the financial services industry is critical to the enhancement of our industry.

On Tuesday, January 30 at 1:30 PM, Leigh Lowman, CFA, Investment Manager at Brinker Capital will be participating on the Processes and Procedures panel, where they will discuss Due Diligence team structure, tools, communication, and researching and monitoring of products. Leigh shares portfolio management responsibilities for the Brinker Capital Destinations program. She is also involved in the company’s investment process, including asset allocation, manager selection, and due diligence.

And, as part of the CEO Track, I will be participating in the Rep as Portfolio Manager panel on Tuesday, January 30 at 3:00 PM. This panel will address the many questions surrounding the proper usage of Rep as Portfolio Manager programs.

Be sure to follow FSI and the event on social media @FSIWashington

We’re looking forward to a great event in Dallas, Texas!

FSI OneVoice 2

Brinker Capital, Inc., a registered investment advisor

Investment Insights Podcast: Investor sentiment vs. corporate sentiment

Raupp_F_150x150
Jeff Raupp, CFA
Director of Investments

On this week’s podcast (recorded January 19, 2018), Jeff focuses on two indicators we include on the Brinker Capital Market Barometer, namely investor sentiment and corporate sentiment, and our thoughts on how they impact markets.

Quick hits:

  • If investors are extremely optimistic their expectations are high, and a certain degree of good news is already priced into the market, whereas bad news may come as a surprise and cause markets to pull back.
  • If companies have a high level of confidence, they’re more likely to invest in capital expenditures or hire additional people, both of which are good for the overall economy.
  • Intermediate-term indicators like corporate sentiment are ones we weigh heavily. While short-term indicators like investor sentiment are considered, their impact on positioning is much smaller.

For Jeff’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.

There will never be a perfect time to invest

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

Consider something you’ve always wanted to do but that you’ve put off doing because it scares you. In fact, just think of something you’d eventually like to do but haven’t yet, since you may not even be aware of all your reasons for not having embarked on that journey just yet. Maybe that something is having a child. Maybe it’s starting a business. Or perhaps it’s writing a book, getting serious with a romantic partner, or any number of other aspirations you’ve yet to reach. Let’s say for discussion’s sake that the thing you are considering is starting a business. You ask yourself…

“Should I or shouldn’t I start a business?”

Easy enough, right? You make a t-chart, list the pros and cons and then make a decision! Well, let’s examine how you go about dissecting this question. You do your best to dispassionately weigh the pros and perils, but if you’re like most folks (and you are, remember, you’re not special) there is a flaw in the system. Drawing on his background in evolutionary psychology, James Friedrich has concluded that as we evaluate important decisions in our life, our primary aim is to avoid the most costly errors. That is, we make decisions that make us “not unhappy” rather than “blissful.” We want to be “not broke” more than we want to live abundantly. To use the above-mentioned example, you’re far more likely to focus on the potential perils of failing at business than you are the happiness and freedom that might accrue to you.

Never a good time to invest

The evolutionary roots of this system of self-preservation make sense. It was not all that long ago (in terms of evolutionary time) that our forebears were called upon daily to make life and death decisions. For people living on the savannahs of Africa, choosing to zig when you should have zagged could spell the end. Historically, decision-making has been very wrapped up in preserving physical safety and ensuring that physical needs were met. In this life-and-death scenario, minimizing risk at the expense of self-actualization is only logical. However, in the intervening millennia, things have changed and our thought patterns have not kept pace. At least in the US, we now live in a service economy that produces more ideas than it does “things.” We have moved from an agrarian to an industrial to a knowledge-based economy and our ability to cope with personal stressors has not kept pace.

What we are left with is a brain and a decision-making modality that is ill-suited for our modern milieu. We are programmed to choose safety, even at the expense of joy, in an environment where safety abounds and joy is hard to find. Daniel Kahneman and others have shown that people are twice as upset about a loss as they are pleased about a gain. Unless we learn to train our brains to evaluate risk and reward on a more even keel, we will remain trapped in a life of risk-aversion that keeps us from taking the very risks that might make us happy.

Because of the asymmetrical means by which we evaluated risk, it could be truthfully and plainly said that there is never a good time to invest…or have a baby…or start a business…or fall in love. After all, each of these requires us to make ourselves vulnerable, either personally, financially or both, to an unknown future with a very real downside. Markets crash, kids talk back, and businesses fail. But a life lived in shades of grey is the only thing less satisfactory than a life lived at risk of loss. There will always be worries, some founded, others not and investors who are paying attention will never have a sense that it is “all clear.” This uncertainty, this pervasive not knowing, is the hallmark of both life and capital markets and those that have mastered both come to love and embrace it.

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.