Investment Insights Podcast: A review of September markets

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Leigh Lowman, CFA, Investment Manager

On this week’s podcast (recorded October 9, 2017), Leigh provides a quick review of September markets.

 

Quick hits:

  • In September, more clarity surrounding anticipated tax reform policies helped boost consumer and business sentiment and there is now a higher probability that corporate tax cuts and/or move to a territorial tax system will be enacted in the beginning of 2018.
  • Overall macroeconomic data leans positive and we expect the positive market momentum we have seen so far in 2017 will carry through to the end of the year.
  • We remain positive on risk assets over the intermediate-term but recognize we are in the later innings of the bull market.

Listen_Icon  Listen to the audio recording.

Read_Icon  Read the full October Market and Economic Outlook.

 

 

market outlook (2)

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: A review of August markets

Lowman_150x150px

Leigh Lowman, CFA, Investment Manager

On this week’s podcast (recorded September 8, 2017), Leigh provides a quick review of August markets.

 

Quick hits:

  • In a historically seasonally weak month, risk assets exhibited weaker performance in August.
  • Global economies continued to stay the course on the path to recovery with both consumer and business confidence and macroeconomic data remaining positive.
  • We expect that the upcoming actions in Washington may serve as a catalyst for a pickup in volatility, which has been notably absent year to date.
  • However, more volatile periods can often lead to attractive market opportunities.

Listen_Icon  Listen to the audio recording.

Read_Icon  Read the full September Market and Economic Outlook.

market outlook

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: A quick review of July markets

Lowman_150x150px

Leigh LowmanInvestment Manager

On this week’s podcast (recorded August 11, 2017), Leigh provides a quick review of July markets.

 

Quick hits:

  • After a strong first half to the year, positive economic growth continued into July.
  • Second quarter earnings came in strong with both revenue and earnings surprises accelerating from already strong levels.
  • the Senate’s failure to pass a healthcare bill cast a shadow on the “Trump trade”, bringing forth concerns on whether meaningful tax and regulatory reform can be accomplished.
  • Overall economic data leans positive and we expect markets will continue to trend upward over the near term.

For Leigh’s full insights, click here to listen to the audio recording.

investment podcast (6)

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.

 

August 2017 market and economic outlook

Lowman_150x150pxLeigh LowmanInvestment Manager

After a strong first half to the year, positive economic growth continued into July.  Risk assets were up across the board and volatility was notably muted. Second quarter earnings came in strong with both revenue and earnings surprises accelerating from already strong levels, helped by a weaker US dollar and depressed oil prices. On the political front, the Senate’s failure to pass a healthcare bill cast a shadow on the “Trump trade”, bringing forth concerns on whether meaningful tax and regulatory reform can be accomplished. However, this failure may serve as a catalyst for other pro-growth initiatives, such as tax reform, to be pushed through in the near future.  Overall economic data leans positive and we expect markets will continue to trend upward over the near term.

The S&P 500 was up 2.1% in July and reached a record high mid-month, stemming from many large corporations reporting stronger than expected second quarter earnings. All sectors posted positive returns with the largest outperformers being telecom (+6.4%) and technology (+4.3%). Large cap stocks outperformed mid cap and small cap stocks and lead year to date.  Growth outperformed value and leads by a large margin year to date.

market outlook

Developed international equities outperformed domestic equities, returning 2.9% for the month.  Improving fundamentals and increased investor sentiment in both the Eurozone and Japan helped spur continued positive economic growth.  Both regions remain heavily reliant on central bank stimulus programs and speculation has begun on whether the European Central Bank or Bank of Japan will begin easing in the near future. Emerging markets rallied, gaining 6.0% for July, with all BRIC countries posting positive returns.  Brazil was up over 11%, stemming from initial failed corruption allegations of the country’s president, Michel Temer.

Likewise India and China posted strong returns, fueled by strong economic growth and evidence of reform.

Fixed income markets were quiet during the month.  The July Fed meeting was relatively uneventful with an expected announcement of no changes to interest rates. The Bloomberg Barclays US Aggregate Index returned 0.4% with all fixed income sectors posting positive returns. The 10 Year Treasury yield ended at 2.3%, relatively unchanged from the beginning of the month.  High yield spreads contracted an additional 12 basis points. Municipals were up 0.8%, outperforming taxable counterparts.

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. While our macro outlook is biased in favor of the positives and recession is not our base case, especially considering the potential of reflationary policies from the new administration, the risks must not be ignored.

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

Reflationary fiscal policies: Despite a rocky start, we still expect fiscal policy expansion out of the Trump Administration, potentially including some combination of tax cuts, repatriation of foreign sourced profits, increased infrastructure and defense spending, and a more benign regulatory environment.

Global growth improving: U.S. economic growth remains moderate and there is evidence growth outside of the U.S., in both developed and emerging markets, is improving. Earnings growth has improved across markets as well.

Business confidence has increased: Measures like CEO Confidence and NFIB Small Business Optimism have improved since the election. This typically leads to additional project spending and hiring, which should boost growth.

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

Administration unknowns: While the upcoming administration’s policies are still being viewed favorably by investors, uncertainties remain. The market may be too optimistic that all of the pro-growth policies anticipated will come to fruition. The Administration has quickly shifted from healthcare to tax reform legislation. We are unsure how Trump’s trade policies will develop, and there is the possibility for geopolitical missteps.

Risk of policy mistake: While global growth has improved, it is important that central banks do not move to tighten too early. The Federal Reserve has begun to normalize monetary policy, but has room to be patient given muted levels of inflation. The tone of the ECB has begun to shift slightly more hawkish.

The technical backdrop of the market is favorable, credit conditions are supportive, and we have seen acceleration in economic growth. So far Trump’s policies are being seen as pro-growth, and investor confidence is 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 Market Barometer

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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 U.S. 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 U.S. Aggregate: A market capitalization-weighted index, maintained by Bloomberg Barclays, and is often used to represent investment grade bonds being traded in United States. Brinker Capital Inc. and Santander Investment Services are independent entities and neither is the agent of the other.

 

Investment Insights Podcast: A quick review of June markets

Lowman_150x150px

Leigh LowmanInvestment Manager

On this week’s podcast (recorded July 7, 2017), Leigh provides a quick review of June markets.

 

Quick hits:

  • Synchronized global expansion was evident during the second quarter with markets across the globe experiencing positive economic growth.
  • Overall economic data leans positive.
  • We expect markets will continue to trend upward for the remainder of year.
  • 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.

For Leigh’s full insights, click here to listen to the audio recording.

investment podcast (1)

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: A quick review of May markets

Lowman_150x150px

Leigh Lowman, Investment Manager

On this week’s podcast (recorded June 9, 2017), Leigh provides a quick review of May markets.

Quick hits:

  • Risk assets continued with their upward momentum, generally finishing positive for the month.
  • Politics dominated headlines with the spotlight on the Trump administration.
  • Overseas, international markets reacted positively to the French election win of Macron, known for his moderate political stance.
  • Expectations have strengthened for an additional Fed rate hike in June.
  • We currently find a number of factors supportive of the economy and markets.

For Leigh’s full insights, click here to listen to the audio recording.

shutterstock_9514525 (6)

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.

 

June 2017 market and economic review and outlook

Lowman_150x150pxLeigh Lowman, Investment Manager

Risk assets continued with their upward momentum, generally finishing positive for the month. Politics dominated headlines with the spotlight on the Trump administration. Speculation on whether the president interfered with a FBI investigation caused equities to drop mid-month only to quickly rebound based on the strength of positive fundamentals. Overseas, international markets reacted positively to the French election win of Macron, known for his moderate political stance. Expectations have strengthened for an additional Fed rate hike in June as domestic data leans positive with inflation remaining under control and the economy close to full employment.

The S&P 500 Index was up 1.4%. Sector performance was mixed with technology (+4.4%) and utilities (+4.2%) posting the largest gains for the month. On the negative side, energy (-3.4%), financials (-1.2%) and telecom (-1.0%) continued to lag and are all negative year to date. Small caps, which have shown to be more dependent on the “Trump Trade”, finished the month negative and significantly lag large and mid cap stocks year to date. Growth outperformed value and leads year to date.

Developed international equity was up 3.8%, outperforming domestic equities for the third month in a row. The positive outcome of French election boosted markets but much uncertainty currently surrounds the Italian general election with the populist and mainstream parties currently neck-and-neck in the polls. Consumer confidence in the UK also rose but still remains in negative territory as Brexit proceedings continue to move forward. Data from Japan came in positive with a rebound in industrial production and uptrend in housing starts. Emerging markets remained resilient, posting a 3% return, despite the political chaos erupting out of Brazil during the month.

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The Bloomberg Barclays US Aggregate Index was up 0.8%, with all sectors posting positive returns. Despite rising 15 basis points mid-month, the 10 Year Treasury yield ended the month slightly below where it began, at 2.2%. High yield spreads remained relatively unchanged, contracting 8 basis points. TIPS were flat due in part to inflation data coming in below expectations. Municipals were up 1.6%.

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 our macro outlook is biased in favor of the positives and recession is not our base case, especially considering the potential of reflationary policies from the new administration, the risks must not be ignored.

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

  • Reflationary fiscal policies: Despite a rocky start, we still expect fiscal policy expansion out of the Trump Administration, potentially including some combination of tax cuts, repatriation of foreign sourced profits, increased infrastructure and defense spending, and a more benign regulatory environment.
  • Global growth improving: U.S. economic growth remains moderate and there are signs growth outside of the U.S., in both developed and emerging markets, is improving.
  • Business confidence has increased: Measures like CEO Confidence and NFIB Small Business Optimism have spiked since the election. This typically leads to additional project spending and hiring, which should boost growth.
  • Global monetary policy remains accommodative: The Federal Reserve is taking a careful approach to monetary policy normalization. ECB and Bank of Japan balance sheets expanded in 2016 and central banks remain supportive of growth.

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

  • Administration unknowns: While the upcoming administration’s policies are currently being viewed favorably, uncertainties remain. The market may be too optimistic that all of the pro-growth policies anticipated will come to fruition. The Administration has quickly shifted from healthcare to tax reform legislation. We are unsure how Trump’s trade policies will develop, and there is the possibility for geopolitical missteps.
  • Risk of policy mistake: The Federal Reserve has begun to slowly normalize monetary policy, but the future path of rates is still unclear. Should inflation move significantly higher, there is also the risk that the Fed falls behind the curve. The ECB and the Bank of Japan could also disappoint market participants by tapering policy accommodation too early.

The technical backdrop of the market is favorable, credit conditions are supportive, and we have seen some acceleration in global economic growth. So far Trump’s policies are being seen as pro-growth, and investor and business confidence has improved. We expect higher volatility as we digest the onset of new policies under the Trump administration and the actions of central banks, 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.

Investment Insights Podcast: A quick review of April markets

Lowman_150x150px

Leigh Lowman, Investment Manager

On this week’s podcast (recorded May 5, 2017), Leigh provides a quick review of April markets.

Quick hits:

  • After drifting lower for most of the month, risk assets rallied at the end of April and finished in positive territory.
  • The French election spurred a rebound in markets when both Republican and Socialist candidates were edged out in favor of a Centralist candidate.
  • On the domestic side, markets were relatively quiet.
  • We currently find a number of factors currently supportive of the economy and markets.

For Leigh’s full insights, click here to listen to the audio recording.

shutterstock_9514525 (3)

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.

 

May 2017 market and economic review and outlook

lowman

Leigh Lowman, Investment Manager

After drifting lower for most of the month, risk assets rallied at the end of April and finished in positive territory. The French election spurred a rebound in markets when both Republican and Socialist candidates were edged out in favor of centralist candidate, Emmanuel Macron. The election has yet to go into the second round but political uncertainty has decreased as the French voting population appears to be favoring a more moderate political vision. On the domestic side, markets were relatively quiet. Data continued to lean positive with stablizing inflation expectations, continued growth in home prices and elevated consumer sentiment.  Business confidence continued to surge as expectations remain high on the Trump administration’s economic plan but much uncertainty still remains on the administration’s ability to deliver on its promised fiscal growth policies.

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The S&P 500 Index was up 1.0%.  Cyclical sectors outperformed more defensive sectors. Technology (+2.5%) posted the largest gain and leads year to date by a wide margin.  Consumer discretionary (+2.4%) and industrials (1.8%) also posted strong returns for the month.  Energy continued to lag and is down -9.4% year to date.  Both telecom (-3.3%) and financials (-0.8%) were negative for the month. Growth outperformed value for the fourth consecutive month and small cap led both large and mid cap, a reversal from last month.

Developed international equity was up 2.6% for the month, outperforming domestic equities. Positive news surrounding the French election boosted markets but problems remained in other areas within the European Union. UK economic data exhibited signs of weakening as Brexit continues to loom over the economy and debt levels of both Italy and Greece remain problematic. Economic data in Japan showed signs of improvement during the month but growth continues to move at a slow pace.  Emerging markets performed in line with developed markets. The region posted positive returns of 2.2%, fueled by strong growth in China and dissipating fears of US protectionism.

The Bloomberg Barclays US Aggregate Index was up 0.8% for the month with all sectors posting positive returns. The 10 year Treasury yield contracted 10 basis points, ending the month at 2.3%. After slightly widening last month, high yield spreads narrowed 12 basis points. Municipal bonds performed in line with taxable bonds, up 0.7%.  Increased demand and limited supply served as tailwinds for the asset class.

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 our macro outlook is biased in favor of the positives and recession is not our base case, especially considering the potential of reflationary policies from the new administration, the risks must not be ignored.

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

  • Reflationary fiscal policies: With the new administration and an all-Republican government, we expect fiscal policy expansion in 2017, including tax cuts, repatriation of foreign sourced profits, increased infrastructure and defense spending, and a more benign regulatory environment.
  • Global growth improving: U.S. economic growth remains moderate and there are signs that growth outside of the U.S., in both developed and emerging markets, is improving.
  • Business confidence has increased: Measures like CEO Confidence and NFIB Small Business Optimism have spiked since the election. This typically leads to additional project spending and hiring, which should boost growth.
  • Global monetary policy remains accommodative: The Federal Reserve is taking a careful approach to monetary policy normalization. ECB and Bank of Japan balance sheets expanded in 2016 and central banks remain supportive of growth.

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

  • Administration unknowns: While the upcoming administration’s policies are currently being viewed favorably, uncertainties remain. The market may be too optimistic that all of the pro-growth policies anticipated will come to fruition. The Administration has quickly shifted from healthcare to tax reform legislation. We are unsure how Trump’s trade policies will develop, and there is the possibility for geopolitical missteps.
  • Risk of policy mistake: The Federal Reserve has begun to slowly normalize monetary policy, but the future path of rates is still unclear. Should inflation move significantly higher, there is also the risk that the Fed falls behind the curve. The ECB and the Bank of Japan could also disappoint market participants by tapering policy accommodation too early.

The technical backdrop of the market is favorable, credit conditions are supportive, and we have started to see some acceleration in global economic growth. So far Trump’s policies are being seen as pro-growth, and investor and business confidence has improved. We expect higher volatility to continue as we digest the onset of new policies under the Trump administration and the actions of central banks, 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.

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 U.S. 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 U.S. Aggregate: A market capitalization-weighted index, maintained by Bloomberg Barclays, and is often used to represent investment grade bonds being traded in United States.

April 2017 market and economic review and outlook

lowmanLeigh Lowman, Investment Manager

Risk assets finished the quarter in strong positive territory but experienced a pullback in March after notably strong performance for the first two months of the year. In a widely anticipated move, the Fed increased interest rates by 25 basis points on March 15 and rhetoric alluded to the possibility of an additional 2-3 rate hikes this year. However, headlines during the quarter were dominated by speculation surrounding the Trump administration economic plan. After initially surging in the post-election market, investor confidence began to wane as pro-growth policies have yet to come to fruition. Efforts to reform Obamacare were thwarted just prior to the Congress vote on March 24, but uncertainty still remains on the future of healthcare. Overall, economic data remains positive with low unemployment and positive earnings reports and we continue to see signs of improved global growth.

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The S&P 500 Index was flat for the month but finished the quarter up 6.1%. Sector performance was mixed with the technology sector (+12.6%) posting double-digit returns for the quarter. Likewise, healthcare (+8.4%) posted strong quarter returns, a sharp reversal from the sector’s poor performance last year. Energy was negative for both the month (-1.0%) and the quarter (-6.7%). Financials lagged in March (-2.8%) but remained positive for the quarter (+2.5%). Growth outperformed value and large cap led both mid and small cap.

Developed international equity outperformed domestic equity for both the month and quarter, up 2.9% in March and 7.4% for the first quarter. Economic data leaned positive for the European Union and Japan as both regions experienced a pick-up in global earnings and nominal growth. Recent outcomes of European regional elections may also have signaled a weakening in the populist movement, but political uncertainty is still apparent as upcoming elections begin to unfold.

Emerging markets were up 2.6% for the month and 11.5% for the quarter. The region rebounded from a difficult fourth quarter as fears of US protectionism began to dissipate.

The Bloomberg Barclays US Aggregate Index was flat for the month and up 0.8% for the quarter. During the month, the 10 year Treasury yield rose as high as 2.6% in anticipation of the Fed raising interest rates, but finished the quarter at 2.4%, slightly lower than where it started in 2017. After steadily contracting during the first two months of the year, high yield spreads slightly widened in March but still remain at relatively low levels. Municipal bonds outperformed taxable bonds during the quarter, largely due to limited supply and solid demand.

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 our macro outlook is biased in favor of the positives and recession is not our base case, especially considering the potential of reflationary policies from the new administration, the risks must not be ignored.

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

  • Reflationary fiscal policies: With the new administration and an all-Republican government, we expect fiscal policy expansion in 2017, including tax cuts, repatriation of foreign sourced profits, increased infrastructure and defense spending, and a more benign regulatory environment.
  • Global growth improving: U.S. economic growth is ticking higher and there are signs growth outside of the U.S., in both developed and emerging markets, is improving.
  • Business confidence has increased:  Measures like CEO Confidence and NFIB Small Business Optimism have spiked since the election. This typically leads to additional project spending and hiring, which should boost growth.
  • Global monetary policy remains accommodative: The Federal Reserve is taking a careful approach to policy normalization. ECB and Bank of Japan balance sheets expanded in 2016 and central banks remain supportive of growth.

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

  • Administration unknowns: While the upcoming administration’s policies are currently being viewed favorably, uncertainties remain. The market may be too optimistic that all of the pro-growth policies anticipated will come to fruition. We are unsure how Trump’s trade policies will develop, and there is the possibility for geopolitical missteps.
  • Risk of policy mistake: The Federal Reserve has begun to slowly normalize monetary policy, but the future path of rates is still unclear. Should inflation move significantly higher, there is also the risk that the Fed falls behind the curve. The ECB and the Bank of Japan could also disappoint market participants, bringing the credibility of central banks into question.

The technical backdrop of the market is favorable, credit conditions are supportive, and we have started to see some acceleration in economic growth. So far Trump’s policies are being seen as pro-growth, and investor confidence has improved. We expect higher volatility to continue as we digest the onset of new policies under the Trump administration and the actions of central banks, 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.

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.

Barclays Municipal Bond Index: A market-weighted index, maintained by Barclays Capital, used to represent the broad market for investment grade, tax-exempt bonds with a maturity of over one year. Such index will have different level of volatility than the actual investment portfolio. 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 U.S. 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. World Index Ex-U.S. includes both developed and emerging markets. Bloomberg Barclays U.S. Aggregate: A market capitalization-weighted index, maintained by Bloomberg Barclays, and is often used to represent investment grade bonds being traded in the United States.

Brinker Capital Inc., a Registered Investment Advisor.