Founder & Chairman
Anybody ready for spring? As if this winter hasn’t been bad enough, another 10 inches last night…really?! The bright side, it gave me plenty of time to write this newsletter. If you’ve been paying attention to the markets this year, you may have noticed that volatility has returned. Headline risk has returned, and global hot spots have shaken the markets. From currency scares in Latin-American countries, to possible military conflict in Ukraine, headlines have certainly moved the markets this year. That probably won’t change anytime soon.
The good news, we won’t have to deal with budget issues or the debt ceiling for the remainder of 2014. It’s hard to imagine our politicians suddenly contracting a serious case of common sense, probably more like a serious case of procrastination. The bad news, nothing has really been solved, the core problems still exist and will have to wait another year for them to be dealt with in any meaningful or constructive way. One less thing for the market to worry about in 2014.
From a technical point of view, things appear to have gotten a little better. The algorithm is still indicating positive trends and we continue to maintain a fairly high level of equity exposure, within the framework of each of our models. The trend leaders continue to be small cap, technology, and health care. We will be updating our models to reflect some minor changes in those areas. By and large, the equity portion of our models has fared pretty well over the last 6 months. The challenge has come from bonds.
Speaking of bonds, we believe the bond market continues to be a risky proposition. While we don’t think interest rates will skyrocket anytime soon, we do think that they are still more likely to go up rather than down. The Fed started the tapering process in December of 2013, indicating a significant change in monetary policy. While the Fed is reducing its bond purchases, we believe they are well aware that they need to be careful not to move too quickly and disrupt economic progress. It’s a delicate balance, if managed effectively, can prevent bonds from plunging and interest rates from rising too quickly.
One area that we have focused on recently is looking for alternatives to bonds for investors who want income, and are concerned that possible rising interest rates could hurt bonds. We have come up with alternatives that we think look very attractive right now. If you’re sitting with money in the bank, or other fixed income securities that aren’t yielding much income, contact our office and we can talk to you about the opportunities. We’d be happy to show you some strategies we’ve been using to help investors generate more income.
To reiterate an earlier position, we have made some minor changes to the models. As always, if you’re on the automatic change plan we’ve already updated your investments. If you haven’t given us your authorization to use discretion in your accounts, then you will have to send us an email or call the office to let us know you want the changes made to your portfolio.
Visit www.sawchukwealth.com to review past issues of The Marketview.
Securities offered through First Allied Securities, Inc., A Registered Broker/Dealer, Member FINRA/SIPC. Advisory services offered through First Allied Advisory Services, Inc. A Registered Investment Adviser.
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