Investment Insights Podcast: Your Third Quarter Status Report

Hart_Podcast_338x284Chris Hart, Core Investment Manager

On this week’s podcast (recorded August 30, 2016), Chris is back on the mic to provide a market update as the end of the third quarter draws near. Discussion topics include the health of global and domestic markets and reaction to the latest Fed meeting, but here a few quick hits before you listen:

  • So far in the third quarter, despite major indices posting modest losses last week, markets continue to move higher as we approach Labor Day and the end of summer.
  • Fed Chair Yellen is still not willing to commit to a rate hike, but also noted that the case for a rate hike has strengthened in recent months.
  • While the September rate hike probability fell to less than 10% post-Brexit, it has now moved to 42% according to Haver Analytics in recent weeks.
  • Overall, we remain constructive on risk assets, but believe prudence is warranted and volatility should continue to trend higher.

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.

Investment Insights Podcast – Central Banks Back Economies

miller_podcast_graphicBill Miller, Chief Investment Officer

On this week’s podcast (recorded March 17, 2016), Bill explains why recession concerns should continue to lessen and what to expect from the upcoming earnings season:

What we like: Recent Wall Street Journal survey indicates that investors are becoming less fearful of a recession; that trend should continue as central banks across the world are firmly standing by their economies–Janet Yellen most recently

What we don’t like: Second quarter earnings season likely to have residual effects from the weak first quarter; markets may trend sideways for a time; corporations have been the largest buyers of stock but have to step aside during earnings season

What we’re doing about it: Continuing to look for opportunities within high-yield, energy and natural resources

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 – The Rate Hike Has Finally Come

miller_podcast_graphicBill Miller, Chief Investment Officer

On this week’s podcast (recorded December 17, 2015), Bill recaps the Fed’s official decision to raise interest rates:

What we like: It’s finally over! After months and months of conversation and debate, investors can breathe a sigh of relief and now move forward; Yellen was reassuring in describing the stability of the economy and it’s resilience to the increased interest rates

What we don’t like: Notable industry thinkers are questioning the decision and timing of the rate hike; they question the overall resiliency Yellen seems so confident in

What we’re doing about it: Paying close attention to economic data released over the next quarter; interpreting how well the economy is growing and how much financial stress may be present; if commodities and manufacturing remain weak, than perhaps the Fed raised rates too soon

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 – 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 – September 18, 2015

miller_podcast_graphicBill Miller, Chief Investment Officer

On this week’s podcast (recorded September 18, 2015):

What we like: Janet Yellen announced no hike to interest rates; investors had been tracking her policy decision for weeks, making it a distraction, but now some of that stress is alleviated; Yellen was decisive and clear that they wouldn’t raise rates near-term and when they do, there will be fair warning; investors can now focus on the global economy as opposed to that and Fed policy

What we don’t like: As we shift focus to the economy, economic data is currently mixed; employment, housing, and auto are good, manufacturing and production not as much; China, Europe, and Japan have patchwork economic data as well–some good, some bad.

What we’re doing about it: Focusing on growth for investors; watching for earnings reports in early October; leaning more bullish

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.

Fed Likely to Remain Accommodative in the Near Term

Magnotta@AmyLMagnotta, CFA, Brinker Capital

Equity market investors expressed concern last week after the release of the minutes from the latest FOMC meeting suggested that the Federal Reserve is considering slowing down the pace of the current quantitative easing (QE) program. The Fed is currently purchasing $85 billion of U.S. Treasury and Agency mortgage-backed securities per month.

The Fed has changed its stance on when policy would potentially move to a tightening bias, from emphasizing a calendar date to basing it on economic data. The Fed has stated that it would not raise short-term rates until the unemployment rate fell to 6.5% as long as inflation is not expected to rise above 2.5%. With inflation currently running well below their threshold and with the unemployment rate elevated at 7.9%, it is likely the Fed is more focused on bringing down the employment rate, potentially at the expense of higher inflation.

With short-term interest rates already at the zero bound, the asset purchases are attempting to promote the same result as additional cuts to the fed funds rate. Even if the Fed tapers off their asset purchases in the next few months, any QE is still easing. They would just be taking their foot off of the accelerator. We feel that economic growth should remain tepid in the first half of the year and not strong enough to bring down the unemployment rate significantly, so the Fed is likely to keep their accommodative stance. In addition, the key members of the FOMC – Bernanke, Yellen and Dudley – all lean to the dovish side with respect to monetary policy.

Before actual tightening occurs, the Fed will first have to end QE. When the Fed stops asset purchases, it would be in the context of an improving economy. An improving economy is typically a positive for asset prices. As ISI Group shows in the following charts, equity prices have eventually increased in past episodes of policy tightening.

The Fed raised interest rates from 1.00% to 5.25% from June 2004 to June 2006. After a modest correction, equity prices moved up substantially.

The Fed raised interest rates from 1.00% to 5.25% from June 2004 to June 2006. After a modest correction, equity prices moved up substantially.

The Fed tightened in more aggressive increments during the 1994-1995 period. The equity markets moves sideways for a period of time, and then ultimately moved higher.

The Fed tightened in more aggressive increments during the 1994-1995 period. The equity markets moves sideways for a period of time, and then ultimately moved higher.