David Fleer
Bristlecone Value Partners, LLC
12301 Wilshire Blvd., Suite 320
Los Angeles, CA 90025 USA
Work 1-877-806-4141
www.Bristlecone-VP.com


3rd Quarter 2017: World Markets Keep Rising & Nudge Rewarded

October 13th, 2017

If you feel like “déjà vu all over again,” to quote Yogi Berra, you’re not mistaken: US and international stocks rose during the 3rd quarter, bringing returns in the high teens over the past year, including dividends. Here at home, the stock market’s performance is underpinned by favorable fundamental factors: interest rates and inflation remain low, and growth in per-share earnings remains robust, at about 10% to 12%, year-over-year. Further growth is expected thanks to continued expansion of the global economy and optimism about potential US corporate tax cuts. For now, at least, the devastating impact of recent floods, hurricanes, and wildfires affecting large numbers of Americans has so far been shrugged off by consumers and investors’ alike.

This does not alter our cautiously optimistic stance from prior commentaries, and we continue to expect low single digits average returns from US stocks over the next 5 to 7 years. Pockets of value remain hard to find in US equity and bond markets. Now is not the time to let your allocation to risky assets drift above the target that was set to achieve your long-term goals, the so-called strategic asset mix. As John Templeton observed: “Bull markets are born on pessimism, grown on scepticism, mature on optimism, and die on euphoria.” At this stage in the bull market, maintaining the discipline to periodically rebalance into safer and less volatile asset classes is key, even if doing so appears to sacrifice potential short-term returns. Read the rest of this entry »

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The “Nifty Fifty” Becomes the “Nifty Five”

July 24th, 2017

Global capital markets were broadly higher in the second quarter, continuing the trend from Q1. Within our typical client portfolios, 10 of 12 asset classes notched positive returns for the quarter (your own portfolio results may differ – please refer to your Quarterly Portfolio Review Report). The following table shows the recent benchmark returns for every asset class in a 60/40 model portfolio, for the periods ending June 30, 2017:

Year-to-date, the only category still in negative territory is natural resources, where weakness in energy markets (primarily oil and natural gas) has outweighed recent positive trends in precious metals and agricultural commodities. Moreover, returns for this category are negative in trailing 3, 5, and 10-year periods. Even though our allocation to natural resources is quite small, this persistent lag is possibly a source of frustration to many clients, so it’s worth revisiting the role these assets play in the portfolio. Read the rest of this entry »

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1st Quarter 2017 Review: Another Positive 3 Months

April 12th, 2017

U.S. stocks continued their march higher during 2017’s first quarter. The S&P 500, an index tracking the 500 biggest companies traded on US stock markets, was up over 6% in the quarter, and is up more than 17% over the past 12 months (including the reinvestment of dividends).

For most of the quarter, investors remained upbeat that a Donald Trump presidency would result in pro-growth policy changes, including changes to the tax code, rolling back of regulations, and infrastructure spending. Doubts emerged after a failed effort to reform U.S. healthcare in late March, which helped pharmaceutical stocks. Read the rest of this entry »

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4th Quarter Review: American (equities) First

January 26th, 2017

U.S. equity markets pushed broadly higher in Q4 and for calendar 2016, boosted by investor optimism that President-elect Trump’s administration will usher in a wave of business-friendly initiatives including reduced government regulation and lower corporate tax rates. For the first time in 17 years, all three headline domestic indexes (Dow 30, S&P 500, and Nasdaq), finished the year at simultaneous record highs. In a reversal from last year, the strongest returns in 2016 came from Small Cap and Value stocks, as summarized in this heat map of US fund category returns from Morningstar: Read the rest of this entry »

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3rd Quarter Review: More of the Same

October 13th, 2016

In economic news, it was pretty much more of the same. The US economy continued to grow at a tortoise pace during the 3rd quarter. On a positive note, wage growth is accelerating and residential real estate values continue to increase around the country, which bodes well for the future. Typically, as people earn more, and feel wealthier, they also spend more, and in doing so drive further growth. Although the US Federal Reserve did not increase rates at its meeting in September, expectations are that it will do so in December.

In Europe, on the other hand, growth remained elusive. Governments appeared more inclined to relax the austerity policies that have been the hallmark of the past few years. The British pound felt the strain from the uncertainty that comes with the Brexit vote. The business community has the most at stake if trade with England’s partners suffers. There is a risk that investment will slow down in the UK, and possibly in continental Europe, until a clearer picture emerges of the terms of separation from the European Union. In the rest of the world, Emerging Markets recovered dramatically this year. Latin America and particularly Brazil led the way on investors’ hope that the impeachment of President Rousseff will lead to more market-friendly policies going forward. Read the rest of this entry »

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