Client Update
September 2015 - Client Update
The big news right now is…
I am trying to ignore the repetitive news on the Federal Reserve’s interest rate policy – same news for five six years (not really news).
The US Economy
Plugging along still continuing with small improvements. There are a record number of job openings available in the US right now. Unemployment is much better than people think so consumer spending could start to kick in to economic growth soon.
The World Economy
There has been a lot of news about slowing economic growth in China overflowing to its trading partners and to the US. The economic impact to the US is likely to be small. Average investors have been over-reacting which is creating a lot of investment market volatility.
Investments
Right now I am looking for investment opportunities in certain stock sectors that are currently underpriced and have a very good long term outlook. Looking forward, I would like to think that many healthcare stocks, energy stocks and many technology stocks will do very well over the next couple of decades.
I am looking to rebalance into energy, commodities, and emerging markets investments. In balanced portfolios I am looking to rebalance from bonds into stocks a bit. I feel we are closer to reaching a bottom in the energy sector areas and commodities. I am looking to add to these sectors now and over the next six months. Over the next year I am looking for emerging markets stocks to be a good deal for rebalancing into in investment portfolios.
Earning Investment Returns
Bond interest rates look like they will be pretty weak around the world for at least a few more years. We can expect safety or stability investments like bonds or CDs to provide a near zero percent real rate of return for at least a few more years. Average returns for stock portfolios are likely to be modest for a few years as well.
For many smaller portfolios with ordinary risk parameters it will make sense to continue with a traditional asset allocation and rebalancing strategy. With larger investment portfolios or more aggressive portfolios it may be a very good idea to look at some alternative investment categories which may be a bit more difficult to understand, but may also run along a different path from stocks and bonds. I think we should look at some alternatives that include private equity loan backing and volatility hedging.
Peter J Canniff, CFP® professional
