Give thought to how you give this holiday season

Noreen D. BeamanNoreen D. Beaman, Chief Executive Officer

The holidays represent a time when many Americans express love and affection with gifts. Gift giving serves many purposes in our society. It helps define relationships, express feelings, show appreciation, smooth a disagreement, share good fortune, and strengthen bonds. While the joy of giving is undeniable, excessive spending could put your financial goals in jeopardy and ultimately stand in the way of happiness.

The American Research Group projects that the average person will spend $929 on gifts this holiday season. To put this amount in perspective, consider the following:

  • Last year, the average consumer spent $882, so this year consumers believe they will spend on average $47 more than last.
  • The last time consumers spending exceeded $900 was in 2006.
  • We’ve had a somewhat steady climb in spending since 2009 when the average person spent $417.
  • Gift spending peaked in 2001 when the average person spent $1,052 on holiday gifts.

live-simplyAs with any benchmark, the amount of money “the average person” spends on holiday gifts should bear little relevance on your spending. Whether you spend more or less than this projection is a personal choice that is best made with intention and with your own financial situation and goals in mind. These common holiday spending triggers, however, could get in the way of mindfulness and prompt you to spend more than intended.

Keeping up with others. If you try to match the amounts spent by colleagues, friends, family or peers, you could find yourself spending beyond your means and putting your financial goals in jeopardy.

Trying to be fair. A common cause of spend creep happens to create a sense of balance or fairness. When you overspend on one relative, you may be inclined to create equalization by matching the dollar value of gifts for others.

Just getting it done.  For some, holiday shopping is just another task in an already long list of things to accomplish by the end of the calendar year. It’s easy to overspend if you haven’t committed to a spending budget, decided who to buy for and what to get, and taken the time to seek out the best deals.

Autopilot. Sometimes we gift without considering whether the expenditure aligns with current realities. As families evolve, a discussion about how each member would like to celebrate the holidays may be worthwhile. For example, as your extended family grows, it may make sense to discuss a kids-only gift policy, put monetary limits on spending, or do a gift swap.

Self-purchases. Nearly sixty percent of holiday shoppers (58%) will buy for themselves and will spend on average of $139.61 doing so. This year’s projected self-spending is up 4% from 2015 and is at the second-highest level in National Retail Federation survey’s 13-year history.

The holidays only come once a year. Many people enter the holiday season as they would a free zone. They buy until they get to the end of their ever-growing list of recipients. They decorate until every square inch reflects the feeling of festivity in their heart. Unfortunately, many people do so without regard to the implications on short and mid-range financial goals and thus experience feelings of regret.

The act of gift giving has tremendous intrinsic and extrinsic value. A growing body of research suggests that the most important way in which money makes us happy is when we give it away. Gift giving at the expense of long-term financial goals, however, will bring anything but happiness.

Temptations beset all sides of the path to your financial dreams. During the holidays, temptations may take an altruistic form but still involve spending for today’s pleasures and forgetting about the Future You. This holiday season, give thought to how you give because the Future You is depending on your ability to be mindful, spot (over)spending triggers, and positively influence your ability to endure.

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

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.

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.

Investment Insights Podcast – October 16, 2015

miller_podcast_graphicBill Miller, Chief Investment Officer

On this week’s podcast (recorded October 16, 2015):

What we like: Fed preaching lower interest rates for longer periods extends friendly monetary policy; Consumer sentiment higher than expected and may indicate potential higher sales and earnings for retailers during holiday season

What we don’t like: Sales growth generally weak; Walmart missed earnings; need growth for stocks to go higher

What we’re doing about it: Looking for positive signs of growth, perhaps that’s consumer sentiment

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.

In the Conversation: No Surprises Here

Tom WilsonTom Wilson, Managing Director, Wealth Advisory &
Senior Investment Manager

After completing their two days of meetings, The Federal Reserve decided to leave the Federal Funds Rate unchanged. As noted in yesterday’s blog, this was the consensus opinion of what would take place today.

The Fed noted that general business conditions had improved since their last meeting in July. They specifically noted the continued improvement in the labor markets, strength in the housing sector, and modest improvement in consumer and business spending. On the negative side, they stated that export growth has been soft and that inflation continued to run below the committee’s longer-term target. In addition, Fed chair Janet Yellen commented that weakening global growth had also contributed to today’s low level of inflation.

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.

Investment Insights Podcast – June 30, 2015

Bill MillerBill Miller, Chief Investment Officer

On this week’s podcast (recorded June 26, 2015):

What we like: Consumer is healthier; stronger wage increases; consumer income and spending increasing

What we don’t like: Opposite occurring with corporations; they are not investing as much in their businesses; yields lower productivity

What we’re doing about it: Staying put; feels like a mid-cycle weakness; monitoring the slow, but positive economic growth

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.

 

Investment Insights Podcast – December 22, 2014

Bill MillerBill Miller, Chief Investment Officer

On this week’s podcast (recorded December 18, 2014):

What we like: Lower oil (gas) prices; giant tax break for U.S.; research says there could be a net of around $100B more in consumer spending

What we don’t like: U.S. Energy Renaissance may start to slow; less drilling in shale regions next year; risk of sovereign default (Venezuela); likely recession to hit Russia

What we’re doing about it: Tilt towards the beneficiaries of the energy complex (hotels, airlines, etc.)

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

Monthly Market and Economic Outlook: November 2014

Amy MagnottaAmy Magnotta, CFASenior Investment Manager, Brinker Capital

After a pullback that began in mid-September, the equity markets bounced back sharply in the last two weeks of October. The equity markets shrugged off the end of the Fed’s quantitative easing program and slower economic growth outside of the U.S., viewing the weakness as a buying opportunity. After being down -7% during the correction, the S&P 500 ended the month at a new high. Utilities and healthcare were the top performing sectors, while energy and materials were negative on the month. Small caps bounced back even harder than large caps with the Russell 2000 gaining +6.6% in October, yet small caps have not yet eclipsed their July highs. Year to date through October, mid cap value has been the best performing style, gaining +11.9% due to the strong performance of REITs and utilities.

International equity markets were mixed in October. Developed markets, including Europe and Japan, were generally negative, while emerging markets ended the month in positive territory, led by strong performance in India and China. The U.S. exhibited further strength versus both developed and emerging market currencies. International equity markets have significantly lagged the U.S. markets so far this year; the spread between the S&P 500 Index and MSCI ACWI ex USA Index is 1200 basis points through October.

During the equity market sell-off U.S. Treasury yields declined. The yield on the 10-year note fell almost 50 basis points to a low of 2.14% on October 15, then moved slightly higher to end the month at 2.35%. It was a good month for the fixed income asset class, with all sectors posting positive returns led by corporate credit. High-yield credit spreads widened out 100 basis points in the equity market sell-off, but recaptured 75% of that move in the last two weeks of October. High-yield spreads still remain 100 basis points wider than the low reached in June, and the fundamental backdrop is positive. Municipal bonds had another solid month, benefiting from a continued supply/demand imbalance and improving credit fundamentals.

Our macro outlook has not changed. When weighing the positives and the risks, we continue to believe the balance is shifted even more in favor of the positives over the intermediate-term and the global macro backdrop is constructive for risk assets. As a result our strategic portfolios are positioned with an overweight to overall risk. A number of factors should support the economy and markets over the intermediate term.

  • Global monetary policy remains accommodative: Even with QE complete, Fed policy is still accommodative. U.S. short-term interest rates should remain near-zero until mid-2015 if inflation remains contained. The ECB stands ready to take even more aggressive action to support the European economy, and the Bank of Japan expanded its already aggressive easing program.
  • Pickup in U.S. growth: Economic growth in the U.S. has picked up. Companies are starting to spend on hiring and capital expenditures. Both manufacturing and service PMIs remain in expansion territory. Housing has been weaker, but consumer and CEO confidence are elevated.
  • U.S. companies remain in solid shape: U.S. companies have solid balance sheets that flush with cash. M&A deal activity has picked up this year. Earnings growth has been ahead of expectations and margins have been resilient.
  • Less uncertainty in Washington: After serving as a major uncertainty over the last few years, Washington has done little damage so far this year. Fiscal drag will not have a major impact on growth this year, and the budget deficit has also declined significantly. Government spending will again become a contributor to GDP growth in 2015.

Risks facing the economy and markets remain, including:

  • Fed’s withdrawal of stimulus: Risk assets have historically reacted negatively when monetary stimulus has been withdrawn; however, tapering was gradual and the economy is on more solid footing this time. Should inflation measures pick up, market participants will quickly shift to concern over the timing of the Fed’s first interest rate hike. However, the core Personal Consumption Expenditure Price (PCE) Index, the Fed’s preferred inflation measure, is up only +1.4% over the last 12 months and we have not yet seen the improvement in the labor market translate into a level of wage growth that is worrisome.
  • Global growth: While growth in the U.S. has picked up recently, concerns remain surrounding growth in continental Europe, Japan and some emerging markets. Both the OECD and IMF have downgraded their forecasts for global growth.
  • Geopolitical risks: The events in the Middle East and Ukraine, as well as Ebola fears could have a transitory impact on markets.

Despite levels of investor sentiment that have moved back towards optimism territory and valuations that are close to long-term averages, we remain positive on equities for the reasons previously stated. In addition, seasonality and the election cycle are in our favor. The fourth quarter tends to be bullish for equities, as well as the 12-month period following mid-term elections.

Our portfolios are positioned to take advantage of continued strength in risk assets, and we continue to emphasize high-conviction opportunities within asset classes, as well as strategies that can exploit market inefficiencies.

Asset Class Outlook Favored Sub-Asset Classes
U.S. Equity + Large caps growth
Intl Equity + Emerging and frontier markets, small cap
Fixed Income - Global high-yield credit
Absolute Return + Closed-end funds, global macro
Real Assets +/- Natural resources equities
Private Equity + Diversified

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. Past performance is not a guarantee of similar future results. An investor cannot invest directly in an index.

 

Investment Insights Podcast – October 28, 2014

Bill MillerBill Miller, Chief Investment Officer

On this week’s podcast (recorded October 27, 2014):

What we like: Oil prices are down, which is good for overall energy prices; may present slight tax break; lower prices may help consumption moving into the holiday season

What we don’t like: U.S. has been the beneficiary of the energy renaissance for the past few years, with high oil prices being a good thing; lower oil prices may weaken that renaissance

What we’re doing about it: Watching to see if Goldilocks period will continue; watching if oil prices fall further and hurt U.S. energy renaissance

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.

Economic Data Lifts Stocks, Market Commentary by Joe Preisser

Global equities resumed their upward march last week, reclaiming levels unattained since April, following the issuance of economic data from both the Eurozone and the United States, which largely exceeded expectations. The release of gross domestic product figures from Germany and France offered encouragement to investors as they revealed more favorable readings than analysts had forecast. Alexander Kraemer, an analyst at Commerzbank AG was quoted by Bloomberg News, “while not great in any way, German and French GDP numbers were better than expected, which adds to the scenario that there is no risk of an imminent euro break up. It shows that global growth is not collapsing, which also helps reduce investment risks.”

Following closely on the heels of the positive news from the Continent was a report of retail sales from the United States which surpassed expectations. In a sign that consumer spending may be on the rise, all of the major categories surveyed rose to post the largest increase in five months (New York Times). Adding to the optimism already present in the marketplace were better than expected readings on industrial production and consumer prices, as well as continued signs of stabilization from the labor and housing markets in the U.S. (Bloomberg News) released during the latter portion of last week.

The concern with which the Israeli government views the threat of the nation of Iran acquiring a nuclear weapon was on full display last week as a marked increase in bellicose rhetoric as well as highly publicized preparedness measures for its citizenry emanated from the country. Comments made by the Israeli Ambassador to the United States, Michael Oren, during a Bloomberg Government breakfast in Washington last Wednesday served to highlight the rapidly rising tensions. “Diplomacy hasn’t succeeded. We’ve come to a very critical juncture where important decisions have to be made.”

The distribution of gas masks to the public, as well as the testing of other civil defense measures last week accompanied the strong warnings from Mr. Oren and further revealed the precariousness of the situation. As the potential for a preemptive Israeli military strike continues to mount, and with it the possibility of a major disruption of the supply of crude oil to the global marketplace, the risk premium assigned by traders around the world to the per barrel price has contributed significantly to the twelve per cent rally seen since June, which if unabated will hold negative repercussions for the world economy.

As the data released last week continues to outpace expectations, the belief has grown within the marketplace that the economic improvement seen, although still only incremental, may reduce the chances of the Federal Reserve enacting additionally accommodative monetary policies in the near term. In a reflection of this growing sentiment among traders, prices of U.S. Treasury debt have moved significantly lower over the course of the last several weeks, sending yields, which rise when prices decline, to levels unseen since May as the bond market has begun to adjust to the changing environment.

Byron Wien, Vice Chairman of the Blackstone Group’s advisory services unit gave voice to an increasing belief among investors, in an interview with Bloomberg News, “housing is bottoming, gasoline is down from the beginning of the year. The European situation is getting better, not resolved, but getting better…there will be more good news than bad.”