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: Seasonally Stronger Markets Ahead

Hart_Podcast_338x284Chris Hart, Core Investment Manager

On this week’s podcast (recorded September 16, 2016), Chris provides a fresh market update as volatility has picked up recently. Listen in as he discusses market performance and what’s to come in the fourth quarter.

Quick hits:

  • Returns are positive for most segments of the markets; however, volatility has picked up recently and equities have declined over the past week or two
  • This is typically a weak part of the calendar year for the markets, but this soft period should be behind us soon as mid-October typically marks the end of this softer stretch in the markets before seasonally stronger fourth quarter takes hold
  • A rate hike can’t be discounted completely and could be a shock to the markets if it happens.

For the rest of Chris’s 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.

Will The Santa Claus Rally Deliver in 2015?

HartChris Hart, Core Investment Manager

It is that time of year again. The time when Wall Street pundits begin to talk about the potential for the stock market to deliver its year-end present to investors, neatly wrapped in the form of positive gains to finish out the year, and even carry over into January. While seasonality is typically associated with the entire fourth quarter of a given year—as November and December tend to be stronger months for the S&P 500 Index—the “Santa Claus rally” is a more defined subset.

The Santa Claus rally concept was first popularized in 1972 by Yale Hirsch, the publisher of the Stock Trader’s Almanac, when he identified the positive trend between the last five trading days of the year and the first two trading days of the New Year. Over those seven trading days since 1969, the S&P 500 Index posted an average gain of 1.4%. However, investors have had to wait until the last week of the month to see if the actual Santa Claus rally occurs.

Over the years, analysts have speculated many possible explanations for the notion of a Santa Claus rally. One is that investors are simply more optimistic in the holiday season and market bears are on vacation. Others contend that consumers may be investing their holiday bonuses. A more technical explanations could be that year-end, tax-loss selling creates oversold conditions (i.e. buying opportunities) for value investors to buy stocks. Some propose the theory that portfolio managers may try to “window dress” their portfolios in an effort to squeeze out additional performance before year end. Regardless of the various possible explanations, market data supports the idea that since 1950, December has been the best month of the year for the S&P 500 Index.

Strategas: Historically the Best Month of the Year

Source: Strategas

That said, there are no guarantees on Wall Street and the delivery of a Santa Claus rally is no exception. In fact, the lack of a rally could be an important market signal. The Stock Trader’s Almanac warns, “If Santa Claus should fail to call; bears may come to Broad & Wall.” Interestingly, Jeffery Hirsch, son of Yale Hirsch and current editor of the Stock Trader’s Almanac, notes that over the past 21 years, the Santa Claus rally has failed to materialize only four times, and that preceded flat market performance in 1994 & 2005, and down markets in 2000 and 2008.

With so many macro forces at work here in the U.S. and globally, the presence of both headwinds and tailwinds in the current market allows room for debate as to whether or not the Santa Claus rally will occur 2015. The dollar remains strong, manufacturing is slowing, and energy remains under pressure due to low oil prices. However, valuations are not unreasonable, economic growth continues, albeit modestly, and we are seven years into a domestic bull market that continues to move higher amid shorter-term bouts of resistance and volatility. While some naysayers contend that the abnormally strong gains in October may have cannibalized some of December’s potential rally, I believe the Federal Reserve is one of the real wild cards here. If the Fed decides to raise interest rates in mid-December for the first time since 2008, higher levels of uncertainty could temper investor enthusiasm, depending on the Fed’s language regarding the duration and magnitude of any such action.

While I remain a believer in the magic of the holidays and am optimistic that the market can justify a Santa Claus rally in 2015, there are too many mixed signals across the markets to be certain. In the end, I just hope the Santa Rally of 2015 does not prove to be as elusive as that clever little Elf on the Shelf.

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 – November 6, 2015

miller_podcast_graphicBill Miller, Chief Investment Officer

On this week’s podcast (recorded November 5, 2015):

What we like: Clearer reasoning into why the economy was weak during summer months; inventories were too high, so businesses (smartly) quit building inventory allowing a drawdown; final demand for goods and services was positive; ultimately, slowdown seems temporary, lending itself to a positive outlook for fourth quarter; Central banks supporting economic growth via quantitative easing measures.

What we don’t like: Janet Yellen stated that she may in fact raise interest rates (by December); spooked the bond market as it seemed unlikely until 2016.

What we’re doing about it: Evaluating the soon-to-be-released employment report and its impact on Yellen’s potential decision.

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 – 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.

Investment Insights Podcast – October 2, 2015

miller_podcast_graphicBill Miller, Chief Investment Officer

On this week’s podcast (recorded October 1, 2015):

What we like: Entering the fourth quarter after a seasonally-weak third quarter; no immediate signs of recession

What we don’t like: Continued weakness in emerging markets (Brazil); China’s slowdown still grabbing headlines

What we’re doing about it: Looking for right entry point into the market

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.