Carousel of Political Discontent

Stuart Quint, Investment Insights PodcastStuart P. Quint, CFA, Senior Investment Manager & International Strategist

Hung parliaments in three recent elections may have investment implications. On this latest podcast, Stuart discusses what’s happening in Spain, Austria and Australia.

Quick hits:

  • Recent elections in Spain, Austria, and Australia highlight that voters are divided and unable to render a clear mandate for government.
  • Other parts of Europe appear vulnerable.
  • Politics pose risk to financial markets; loose monetary policy likely to persist in many places.

What do Spain, Austria, and Australia have in common? (No, this is not a trivia question nor the opening line of a bad joke.)

Each country in recent weeks has held elections, all of which failed to elect governments backed by a majority of the vote (with one case leading to yet another election).  Tepid economic growth has led to divided voters that could make it more difficult for governments to enact policies needed to stimulate economies. They each are riding “a carousel of political discontent”.

Starting in Spain

On June 26, Spain held general elections for the second time in six months (results of which were overshadowed by the Brexit referendum).  Both elections failed to confirm one party with a sufficient majority to form a government.  In fact, the two centrist-right and left parties lost parliamentary seats to smaller fringe parties. However, the June election did result in a higher seat count for the ruling center-right party.  Hope exists for the incumbent center-right party to be able to form a coalition, though most likely without support of a majority of parliament.[1]

Sobering developments in Austria

In May, Austria tried to elect a president, an office with more ceremonial functions than real political power.  The two final candidates came from the Greens and the far-right Freedom Party, parties not belonging to the traditional establishment.  After a very slight victory (50.3% to 49.7%)[2] for the Green candidate, the Austrian Constitutional Court annulled the results and rescheduled the election for October.[3]  Austria potentially might be the first country in the EU to elect a president from the far right, a sobering development in light of populist antipathy to the Euro project.

Instability in Australia

Elections that were intended to solidify the ruling coalition in Australia could end up having the opposite effect.  The ruling Liberal-National party coalition has lost seats in both houses of Parliament and faces the risk of forming a minority government.  Yet again, fringe parties siphoned off votes both from the incumbents and main opposition party Liberals. Australia has already suffered through five different Prime Ministers in the last six years. The last thing it needs is another unstable government and the risk of political paralysis and potential new elections.

Notable similarities

Three different countries with three different cultures still share some common themes. Slow economic growth has contributed to disillusionment with establishment parties. The new wrinkle is that cohesion in the traditional opposition, as well as incumbent parties, is unraveling. Fringe parties representing both ideological (far right and left) as well as parochial interests are gaining. Though unable to govern themselves, these fringe parties potentially could play greater roles as “kingmakers” for establishment parties to form ruling coalitions. More focus would be spent on holding together the coalition and catering to parochial issues rather than carrying through reforms to stoke confidence in the economy. Weak coalitions are prone to collapse and thus, new elections.

What’s the impact on other countries?

Other candidates for this cycle of discontent stand out in Europe, particularly countries in the Euro.  With its past history of rotating governments, Italy might reemerge as the popularity of incumbent PM Renzi has taken a hit from reform setbacks and lack of economic growth. The fringe opposition party Five Star enjoys significant popularity as shown in victories in recent municipal elections. The party espouses holding a referendum on Italy’s membership in the Euro. It might see opportunity to challenge Renzi in October when a referendum on voting reform is scheduled. If Renzi were to lose that vote, early elections are likely to ensue.

France also stands out with a vigorous populist far-right opposition party in the National Front of Marine LePen.  General elections in 2017 with the incumbent government suffering from depressed approval ratings could introduce additional market volatility. Along with a stagnant economy, France has also suffered backlash against efforts to reform labor markets.

What needs to change?

Political malcontent with economic growth has the potential to continue and add to market volatility. It also could lead to paralysis on fiscal and structural reform needed to accelerate growth. One consequence is likely: central banks will not be retreating from active monetary policy anytime soon in the face of weak growth, even if much of their dry powder has already been spent. Government inaction will still be replaced by central bank stimulation unless the situation changes.

Click here to listen to the podcast.

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, a Registered Investment Advisor.

[1] http://www.abc.es/espana/abci-rajoy-cita-manana-moncloa-201607051229_noticia.html  accessed on July 5, 2016.

[2] http://www.abc.net.au/news/2016-05-24/independent-van-der-bellen-wins-austrian-presidential-vote/7439372  accessed on July 5, 2016.

[3] https://www.theguardian.com/world/2016/jul/01/austrian-presidential-election-result-overturned-and-must-be-held-again-hofer-van-der-bellen accessed on July 5, 2016.

The Impact of Brexit

Amy MagnottaAmy Magnotta, CFASenior Investment Manager, Brinker Capital

An overview of highlights from our Investment Team on the impact of Brexit on markets and Brinker Capital portfolios.

Key Highlights:

  • Today is largely a retracement of last week’s market action. Over the last week, the MSCI EAFE Index was up over 7% and the Russell 3000 Index almost 2% as the market anticipated a “remain” vote. We’ve retraced that rally today, but global markets are only marginally down from levels seen a week ago.
  • Brinker Capital portfolios have generally been underweight to international markets, specifically developed international markets.
  • This vote is a political event, not an economic event. It marks the coming end of the UK’s trade agreement with the EU, but the process is one that will likely take years. What it has done immediately is increased the level of uncertainty in markets. We will likely see additional global central bank liquidity and easing in an effort to support economies and markets.
  • Emotional trading can create opportunities, so our focus over the coming weeks and months will be to identify and take advantage of these opportunities.

Brexit’s Impact on Global Economies and Markets

  • The economic and political impact on the UK is decidedly negative, but the degree of which is uncertain. The currency and equity markets will be weaker in the near term while the long-term outlook is unclear given the politics involved.
  • The negative economic impact on Europe is less, but still meaningful. From a political perspective, the departure highlights the rising risk of populism and becomes another distraction for the EU from much-needed reforms. We expect a weaker euro and European risk assets in the near term; the central bank could try to cushion some impact.
  • International markets will experience the indirect effects of lower global growth and general risk aversion.
  • We do not see it as having a significant direct impact on the U.S. economy; however, a strengthening U.S. dollar as a result will be a headwind for U.S. companies with significant international business.
  • Expectations for additional interest rate hikes by the Federal Reserve have plummeted. Today, the futures curve is predicting a zero chance of a rate hike in September (down from 31% yesterday) and a 14% chance in December (down from 50%).

How Brinker Capital is Positioned in Strategic Portfolios

  • Portfolios have been positioned with a meaningful underweight to international equity markets in favor of domestic equity markets.
  • The underweight has been concentrated in developed international markets, due to concerns over long-term structural issues in their economies that have an impact on economic growth.
  • We don’t anticipate any immediate changes to the portfolios as a result of these events as we feel we were well positioned ahead of the news, and we expect to reallocate portfolios in late July.

Overall Summary

  • We think this is an extended process that will develop over the coming months and years. Today, the market is pricing in the uncertainty, but this will be a fluid and evolving process.
  • The market selloff today has been relatively orderly and largely a retracement of the gains of the last week.
  • Our portfolios were well positioned in advance of the vote with an underweight to international markets.
  • We expect the uncertainty to result in higher levels of volatility, which creates opportunities for active management.

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.

June 2016 Monthly Market and Economic Outlook

Amy MagnottaAmy Magnotta, CFASenior Investment Manager, Brinker Capital

After a weak start to the month, risk assets finished May with strong returns. Despite increased rumblings for a mid-year Fed rate hike creating uncertainty in the market, climbing oil prices and strong housing data helped uphold investor confidence and worked as a catalyst for positive gains during the month. Corporate earnings generally beat analyst expectations, but overall earnings growth is still negative year-over-year. Markets were volatile and we expect this trend to likely continue as central bank actions continue to unfold and we move closer to the end of the business cycle.

The S&P 500 Index gained 1.8% for the month, finishing just shy of the all-time high reached in May 2015.  Sector performance was mixed. Energy, materials and industrials lagged for the month, but still remain in positive territory year-to-date. Technology, healthcare and financials sectors had strong performance with technology posting returns of over 5%. Growth outpaced value in large and small caps and was equivalent in mid cap. Small and micro cap stocks outperformed large cap stocks.

International equity markets lagged U.S. equity markets.  Although international equities experienced a similar pullback in the beginning of the month, the subsequent rally failed to pick up the same momentum as U.S. equities.  A strong dollar coupled with weak profit growth and uncertainty surrounding the potential Brexit were drags on performance.  Emerging markets lagged developed international equity markets; with almost all EM countries finishing the month in negative territory. In particular, Latin America posted double-digit negative returns resulting from political turmoil in Brazil.

The Barclays Aggregate Index was flat for the month with most sectors finishing either flat or in slightly negative territory. Treasury yields fell mid-month only to rise back up as the market began pricing in the possibility of another Fed rate hike. Treasury yields ended the month relatively unchanged from beginning levels and the investment grade credit was flat.  High yield spreads slightly contracted and the asset class eked out a small gain. Municipals also finished slightly positive.

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 remain supportive.

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 a bounce in the second quarter as has been the pattern. Payroll employment growth had been solid, but May’s report was disappointing. 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: Fiscal policy is 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: 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 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, helped by a macroeconomic environment that 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.

Investment Insights Podcast – Brazil: Does Rousseff’s Impeachment Muddy the Future?

Stuart Quint, Investment Insights PodcastStuart P. Quint, CFA, Senior Investment Manager & International Strategist

On this week’s podcast (recorded May 16, 2016), Stuart discusses what the President of Brazil’s impeachment means for the near-term future of the country. If you missed Stuart’s initial framework around Brazil, you can catch up here first.

As discussed, why talk about Brazil?

  • It’s the largest economy in Latin America.
  • It’s the eighth largest economy in the world.
  • For the last several years, it’s been a large drag on emerging market economic growth.
  • There is potential to have a positive impact with the recent shock to the political system.

What does Rousseff’s impeachment announcement entail?

  • Brazilian senate approved in large majority to impeach President Dilma Rousseff and replace with Vice President Michel Temer.
  • General elections to take place in 2018, and with the Olympics in Rio a few months away, the window for the government to pass reforms is short.
  • Rousseff is the third president to be impeached since 1992.
  • Key test will be whether such enthusiasm for impeaching Rousseff will apply to tough votes on fiscal reform needed to restore economic confidence in Brazil.

What’s the upside with Temer?

  • Michel Temer has already named a cabinet that includes former president of the Central Bank of Brazil, Henirque Meirelles
  • Meirelles presided over the strong Brazilian economy during the two terms of former President Lula prior to Rousseff taking office.
  • The government deficit lies at the heart of what ails Brazil and might improve under the right circumstances.

How does the government begin to reign in the deficit?

  • Debt to GDP is growing 10% a year.
  • The government, simply put, must raise revenues and cut expenditures; but, this is easier said than done.
  • Higher taxes are troublesome and could stunt the already weak economy.
  • One tax likely to be reintroduced is a basis point tax on financial transactions, which should have a high success rate in collecting revenues, but it also could dampen economic activity.
  • Expenditures could be difficult to reduce given legal restrictions and the still-fragile political situation.
  • Fiscal expenditures offer the potential to improve the fiscal situation, but it is also the most susceptible to politics.

 Where does Brazil stand now?

  • Given that Temer has an approval rating just barely above that of Rousseff¹, it is unclear whether he has enough political capital to push through needed reforms.
  • The ongoing corruption investigations known as Carwash potentially affects politicians of all stripes.
  • Opposing interests in Congress might find it in their own self-interest to “bite the bullet” on passing just enough reforms to stabilize the country in time for new elections in 2018.
  • In short, while the economic obstacles are challenging, it is possible to see improvement in the fiscal balances.

Please click here to listen to the full 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, a Registered Investment Advisor.

Investment Insights Podcast – Japan: Sunset on the Horizon?

Stuart Quint, Investment Insights PodcastStuart P. Quint, CFA, Senior Investment Manager & International Strategist

On this week’s podcast (recorded April 29, 2016), Stuart puts the focus on Japan and their struggling economy especially on the current political climate and its economic impact.

Why talk about Japan?

  • It’s the third largest economy in the world.
  • It’s one of the world’s leading lenders to the rest of the world, including the U.S.
  • Political fallout and economic downside loom if monetary easing policy is not accompanied with fiscal progress.

What’s the latest?

  • On April 27, the Bank of Japan decided not to add to currently high quantitative easing, greatly disappointing the markets.
  • The Japanese Yen appreciated over 2% (versus the U.S. dollar), that’s a negative given that two-thirds of the equity market is based towards overseas earnings.

How did Japan get here?

  • Back in 2013, Shinzo Abe inspired hope to reinvigorate the economy through the three arrows: monetary policy, fiscal stimulus, and structural reform.
  • The reality is there has been little-to-no follow through on fiscal policy or structural reform.
  • Bank of Japan has created a massive QE program, owning one out of every three long-duration government bonds.

Japan_Chart_1

So, did the quantitative easing measures work?

  • QE helped asset prices, but did not reset inflationary expectations nor economic growth (GDP around 1%).
  • Japanese corporations aren’t investing back into Japan, but rather overseas.
  • Negative interest rates have resulted in a deceleration in bank lending.

That’s not great, but what does that mean exactly?

  • Failure in Japan could also have implications for global markets.
  • Despite stagnant growth for parts of the last three decades, Japan remains the third largest economy and second largest equity market.
  • Japan is also one of the largest holders of U.S. Treasuries.

Shoot me straight here, has Japan entered into the “sunset” phase?

  • It appears likely that Japan still has liquidity to muddle through its problems for now, but one cannot rule out a more negative scenario with the latest inaction and failure to improve the economy.
  • Fiscal stimulus could come in light of the recent earthquake, but progress on tax code reform and increased spending would provide longer-lasting relief.
  • One potentially negative scenario could come in July if a larger-than-expected victory for the opposition happens–this could lead to general elections and the departure of Abe causing policy uncertainty and higher volatility.

Please click here to listen to the full 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, a Registered Investment Advisor.

April 2016 Monthly Market And Economic Outlook

Amy MagnottaAmy Magnotta, CFASenior Investment Manager, Brinker Capital

After an extremely volatile quarter, the broad equity market indexes ended just about where they started. Risk assets began the year under heavy pressure, with the S&P 500 Index declining more than -10% to a 22-month low on February 11. Concerns over the global growth outlook and the impact of further weakness in crude oil prices weighed on investors, and investor sentiment hit levels of extreme pessimism. Then we experienced a major reversal beginning on February 12, helped by a rebound in oil prices after Saudi Arabia and Russia agreed to freeze production, and more dovish comments by the Federal Reserve. Expectations regarding the pace of additional rate hikes by the Fed have been tempered from where they started the year.

All U.S. equity sectors ended the quarter in positive territory except for healthcare and financials. Dividend paying stocks significantly outperformed, resulting in a strong quarter for both the telecom and utilities sectors, and value indexes overall. From a market capitalization perspective, mid-caps outperformed both large and small caps, helped by the strong performance of REITs, another yield-oriented asset class.

Developed international equity markets lagged U.S. equity markets in the first quarter despite benefiting from a weaker U.S. dollar. Japan and Europe were particularly weak despite additional easing moves by their central banks, while the commodity-sensitive countries, such as Canada and Australia were positive for the quarter. Emerging markets outperformed U.S. equity markets for the quarter despite declines in China and India. Brazil was the strongest performer, helped by a rebound in the currency, expectations for political change, and the bounce in commodity prices.

ECBBonds outperformed stocks during the quarter, and did not even decline during the risk-on rally. Additional easing from the European Central Bank and a negative interest rate policy in Japan prevented U.S. bond yields from moving higher.

All fixed income sectors were positive for the quarter, led by corporate credit, which benefited from meaningful spread tightening, and TIPS, which benefited from their longer duration. Municipal bonds delivered positive returns, but lagged taxable fixed income.

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: Despite the Federal Reserve beginning to normalize monetary policy with a first rate hike in December, their approach 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, and China is likely going to require additional support.
  • Stable U.S. growth and tame inflation: U.S. economic growth has been modest but steady. 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.
  • Solid 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.
  • Slower global growth: Economic growth outside the U.S. is decidedly weaker, and a significant slowdown in China is 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.
  • Further weakness in credit markets: While high yield credit spreads have tightened from February’s wide levels, further weakness would signal concern regarding risk assets more broadly.

The technical backdrop of the market has improved, as have credit conditions, while the macroeconomic environment remains 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; however, our view on risk assets 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.

Investment Insights Podcast – Brazil: Does Instability Bring Hope?

Stuart Quint, Investment Insights PodcastStuart P. Quint, CFA, Senior Investment Manager & International Strategist

On this week’s podcast (recorded March 21, 2016), Stuart weighs in on all things Brazil especially on the current political climate and its economic impact.

Why talk about Brazil?

  • It’s the eighth largest economy in the world.
  • It’s the largest economy in Latin America.
  • For the last several years, it’s been a large drag on emerging market economic growth.

So, what’s been happening?

  • Brazilian markets shifted from a bear to a bull in March, as currency rebounded and markets followed.
  • There is increased hope for major political change as the current administration under President Dilma Rousseff faces potential impeachment.
  • Rousseff’s approval rating has plummeted (62% now disapprove) since her reelection in 2014 amid political scandal and economic stagnation.

Let’s talk about this scandal

  • In what has been labeled “Operation Car Wash”, the two-year investigation centers around corruption between oil giant Petrobras involving dozens of corporate executives and political figures.
  • Rousseff was head of Petrobras until 2010, prior to taking office.
  • Former Brazilian President Luiz Inácio Lula, who was to be Rousseff’s Chief of Staff, has been implicated on bribery charges.
  • Encouraged by massive protests, opposing politicians have called for a formal impeachment process to begin.

How does this begin to shape the Brazilian economy?

  • The prospect of a new start in Brazil bodes well for markets–Brazilian index has risen over 27% in 2016, currency has appreciated 10% in March alone.

That’s great, but there’s more to it

  • The path to impeachment is murky and should not be taken for granted.
  • Operation Car Wash has indicted politicians from both the current regime and the opposition.
  • Even with the possibility of a new government, political consensus on structural reform appears evasive for Brazil.
  • Pensions, infrastructure, and autonomy of the central bank are important to address in order to revive the Brazilian economy.

 Where does Brazil stand now?

  • Overall, the economy is in a difficult situation–GDP declined in 2015 and is set to decline again in 2016.
  • Inflation continues to rise and exceeds targets set by Central Bank.
  • Unemployment and bad credit also continue to rise.
  • Given that Brazil represents over half of the GDP and total population of Latin America, economic prospects are important for growth.

Please click here to listen to the full 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, a Registered Investment Advisor.

Investment Insights Podcast – Jolting The Economy

miller_podcast_graphicBill Miller, Chief Investment Officer

On this week’s podcast (recorded March 10, 2016), Bill highlights the latest news out of Europe and China:

What we like: Mario Draghi and the ECB announced a number of pro-stimulus policies; banks supportive in lending to businesses; more quantitative easing supports sovereign debt markets; Draghi trying to be the backstop to support the economy; China’s Five-Year Plan focused on stimulating economy

What we don’t like: Market is realizing that pure monetary stimulus is not enough; there is a global oversupply and printing more money or having markets lend more money isn’t enough to offset; investors are hearing the rhetoric but looking for results

What we’re doing about it: Keeping the same mindset that there will not be a recession; looking for opportunities within high-yield and energy

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 – What Indicators Are Indicating

miller_podcast_graphicBill Miller, Chief Investment Officer

On this week’s podcast (recorded February 18, 2016), Bill comments on what the leading indicators are showing in terms of the stability of the economy and if a recession is likely:

What we like: Leading indicators, published by Department of Commerce, are out and are important in understanding chances of recession; so far, indicators are showing a healthy economy with no recession likely at least in the next six months; stability in oil prices helping to calm the markets; China is actively supporting their economy

What we don’t like: We still need to hear about the ECB exposure to bad loans in China; need more clarity if the Fed will raise rates in March; there’s enough global trauma out there to make raising rates seem unwise

What we’re doing about it: Monitoring this rally period between now and the spring as economic activity is decent; may look to take longer tactical positions

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 – Hope Springs Eternal

miller_podcast_graphicBill Miller, Chief Investment Officer

On this week’s podcast (recorded February 11, 2016), Bill addresses the current market climate and why there is reason to remain hopeful:

What we don’t like: Stocks are down around 10% in general; European stock markets are down even more; Asian markets down the most; it’s a tough environment for investors

What we like: We don’t believe this is a long-term bear market and don’t see a recession hitting the U.S.; labor and wages are positive; auto and housing is good as well; economy seems sturdy despite volatile market behavior; China poised to finalize five-year plan including lowering corporate tax rates and addressing government debt levels; ECB should start to show more support for its major banks

What we’re doing about it: Most of the damage is done; more sensible to see what we should buy or rotate into; hedged pretty fully in tactical products; staying the course in more strategic products

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.