Vlog – Quarter End Q&A: 4Q2018

Brinker Capital Global Investment Strategist, Tim Holland, CFA, asks and answers those questions we think will be top of mind for clients as they open their quarterly statements and think back on the quarter that was:

  1. Why did US equities correct so sharply in 4Q2018?
  2. Why was the market so volatile in 4Q2018?
  3. Is the bull market over?

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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.

2018 wasn’t great, but don’t sing the blues – the world keeps getting better

Holland_F_150x150Tim Holland, CFA, Senior Vice President, Global Investment Strategist

Hard to believe, but the calendar has turned on another year. And for those of a certain age, it’s even harder to believe we are living in 2019; after all The Blues Brothers was released in 1980!

On top of the calendar shock, we have to contend with the fact that 2018 didn’t seem all that great. From an investing perspective, most asset classes were in the red, while the S&P 500 Index (S&P 500) was exceptionally volatile toward year-end and produced its worst total return in 10 years. And, from a political, societal, and cultural perspective, the US seemed more divided than ever.

As always, a bit of perspective is important. The S&P 500 was off less than 5% in 2018 on a total return basis and remains 16.5% higher over the past two years. Meanwhile, the US economy grew 3%+ in 2018 while our unemployment rate sits at just 3.9% and most measures of national wealth and health are at a record high. So, while we must periodically contend with market drawdowns and bouts of economic weakness, it’s important to remember that over time, most economies grow, risk assets increase in value, and the standard of living for all of us on this big blue marble improves.

To put that final point in sharper relief we have two interesting charts from Our World in Data. The first chart speaks to the dramatic increase in life expectancy since 1900, with Africa seeing a particularly significant jump from 50 years in 2000 to 60 years in 2017.

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While the second chart, below, speaks to an almost unfathomable drop in global poverty, with less than 10% of the world’s population living in absolute poverty today compared with 44% in 1981.

world-poverty-since-1820

The new year will likely present its share of challenges and setbacks, yet, if history is any guide, we will see economic growth and rising asset values and wealth created globally.

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.

Top blog posts of 2018

It’s time to close out the year with our top five blog posts from 2018. From our perspectives on market volatility to weekly podcasts and even a recap of the mid-term elections, these are the best of 2018. Enjoy!

Crosby_2015-150x150Dr. Daniel CrosbyExecutive Director, The Center for Outcomes & Founder, Nocturne Capital

The do’s and don’ts of market volatility

You will never regret your vacation

A tomorrow more certain than today

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Tim Holland, CFA, Senior Vice President, Global Investment Strategist

Investment Insights Podcast: What’s roiling the market, and where do we go from here?

 

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Jeff Raupp, CFA, Chief Investment Officer

A quick take on the mid-term elections

 

 

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.

Thoughts on the Federal Reserve Open Market Committee meeting and interest rates

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Tim Holland, CFA,
Senior Vice President, Global Investment Strategist

 

  • As expected, the FOMC raised the Fed Funds rate to a target range of 2.25% to 2.50%.
  • The question for many is given markets had effectively “priced in” or were largely expecting the rate increase, why did equities sell off sharply and bonds rally strongly on yesterday’s Fed Funds news?
  • We – and many market participants – expected the Fed’s post meeting statement and Chairman’s Powell press conference to strike a much more dovish tone over the outlook for interest rate policy into 2019.  We think the Fed fell short on both fronts.
  • The Fed now expects two (instead of three) rate increases next year and also lowered their estimate for GDP growth in 2019 and their estimate of the long-term neutral interest rate (the Fed Funds rate that neither hinders nor helps economic growth).
  • However, we believe the Fed did not adequately recognize the impact recent market volatility, slowing economic growth outside the US and the ongoing US / China trade dust up is likely having on corporate sentiment and spending, and how a weakening of both could ultimately cause the US economy to stall and potentially slide into recession.
  • We see two primary risks for the markets and the economy into the new year – 1) a monetary policy mistake (the Fed going too far, too fast) and 2) a trade policy mistake (the US / China trade dynamic worsening).  After today, we have not yet “solved for” monetary policy risk, which means investors will likely be looking even more intently for good news on the trade front.  We are optimistic that it is coming. In the meantime, the risk posed by monetary policy to the economy and markets has increased.
  • Finally, the next Fed meeting isn’t until January.  We expect investor disappointment over today’s FOMC statement and Chairman Powell’s press conference to be additive to already heightened market volatility.  However, a bear market is not our base case.  There is still time for monetary policy and trade policy to move in a more supportive direction for both the economy and risk assets as we enter 2019. Meanwhile, indicators of an imminent bear market or recession aren’t present, and we can continue to cite several positive economic and market data points, including…
    • The yield curve has not inverted
    • Inflation remains contained (including wage inflation)
    • Corporations and consumers have ample access to credit
    • US fiscal policy remains accommodative
    • US corporate earnings should grow 20%+ this year and by mid to high single digits next year
    • Market valuation is attractive with the S&P 500 trading at about 15x forward earnings

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.

Investment Insights Podcast: What’s roiling the market, and where do we go from here?

Tim Holland, CFA, Senior Vice President, Global Investment Strategist

On this week’s podcast (recorded December 6, 2018),
Tim discusses the recent drawdown in US equities and the associated volatility.

Quick hits:

  • Since October 1st, the S&P 500 is off approximately 9% while also experiencing two intra-period rallies of approximately 6%.
  • While both trade and monetary policy are legitimate concerns for the market into year end, we continue to believe that cooler heads will prevail concerning the US / China trade dynamic and that the US Federal Reserve will move cautiously on interest rates in the new year.
  • Brinker Capital remains constructive on the US economy and US equities into year end.

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

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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 flip side of sell in May and go away

Tim Holland, CFA, Senior Vice President, Global Investment Strategist

On this week’s podcast (recorded November 20, 2018),
Tim discusses the often used Wall Street adage “sell in May and go away,” which cleverly lets the listener know that returns provided by US equities have historically exhibited a seasonal pattern.

Quick hits:

  • US equities have historically exhibited a seasonal pattern, with the months of May, June, July, August, September and October underperforming the months of November, December, January, February, March and April.
  • So far this November, historical patterns haven’t held with the S&P 500; as of this recording, off about 1% on a total return basis month to date.
  • Seasonal patterns aside, we remain constructive on US equities.

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

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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.

Vlog – Putting pullbacks in perspective

Tim Holland, Brinker Capital’s Global Investment Strategist, discusses the importance of putting near-term market performance in perspective before, as always, pivoting back to the fundamentals (recorded November 1, 2018).

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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.

Vlog – Quarter End Q&A: 3Q2018

Brinker Capital’s Global Investment Strategist, Tim Holland, asks and answers those questions we think will be top of mind for clients as they open their quarterly statements and think back on the quarter that was:

  1. Can this record bull market continue to run?
  2. Will weakness in emerging market equities spark a bear market here at home?
  3. Will the Fed continue to raise rates and what might that mean for the economy?

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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.

Vlog – The markets vs. the mid-terms

Tim Holland, Brinker Capital’s Global Investment Strategist, discusses the upcoming Congressional mid-term elections, specifically what party will win the House and the Senate, and how markets might respond once the votes are counted.

 

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: Will Turkey topple the global economy?

Tim Holland, CFA, Senior Vice President, Global Investment Strategist

On this week’s podcast (recorded August 24, 2018),
Tim discusses if the economic and market issues in Turkey might serve as catalysts for a global recession and bear market.

Quick hits:

  • The country’s Borsa Instanbul 100 Index is off 22% year to date and its currency, the Lira, has lost half its value against the US dollar.
  • Turkey accounts for 1.5% of the world’s GDP, so the country is a nominal contributor to global growth.

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


investment 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, Inc., a registered investment advisor.