Terry Sawchuk
Founder & Chairman
The Markets
Never thought I’d see the day when Lake Orion would make any kind of list of potential terrorist strikes, but then, this is a brave new world we live in. Facebook was loaded with people from my area expressing all kinds of thoughts, I won’t fill you in on all the details, but suffice it to say social media has become the best way to prove how stupid one can be. I do think, however, this situation presents a rather unconventional way to highlight how important, media, social or otherwise has become in influencing our thoughts, and ultimately our actions. We’ve become overloaded with content, whether it’s radio, television, print or electronic media, there is absolutely no shortage of opinions. Anybody with an internet connection and a keyboard can author a blog, write a newsletter, loudly express their thoughts on radio or television or like my former friends on Facebook, post pictures of machine gun-toting gentlemen taunting ISIS terror cells. It calls for a serious application of common sense, and some rudimentary risk/reward analysis. In the investment management world, it’s really about filtering out the noise, and focusing on the facts. Or, more succinctly, stop listening to words, and pay attention to the actions.
Let’s focus on actions. Recently, the Federal Reserve board met to discuss all things financial, and decided to remove the word “patient” from the language concerning the future raising of interest rates. While the words no longer say “patient” it’s the actions behind the words that are of concern to us. Removing the word “patient” doesn’t by itself increase interest rates; no that actually takes action. The Federal Reserve board simply gave themselves more room to decide when it will be appropriate. Personally, I don’t think it matters too much when they begin to raise rates, the fact of the matter is a minor rate hike won’t make much of a difference. It’s more symbolic. Do you think that a quarter of a percent increase in rates will stop anyone from borrowing, or induce anyone to buy a bond? The economy is undoubtedly better now than it was in 2009, and although it may not be the equivalent of the roaring 20’s, you might be surprised at how things are going. Let me tell you what is really going on.
Quietly, while the world has been focused on all the negative things the media calls our attention to, we’ve been living through an amazing economic transformation. Believe it or not, we are manufacturing more goods now than we ever have. We are within 5 years of becoming completely and totally energy independent. We have lived through a silent, but remarkable technology boom that has resulted in mind-boggling increases in efficiency that almost nobody thought possible. All of this has lead to a very healthy and solid run up in stocks, and from our point of view, will continue for much longer than most are willing to conceive. There will always be one-off, completely random events that can shake up the markets, but those are typically short-lived and other than creating some anxiety, don’t do much structural damage to the markets. They are essentially unavoidable and therefore pointless to try to manage around, other than to implement prudent diversification. At this point, we really don’t see the signs of a significant structural decline in the economy or the markets, save for some normal headline-based volatility.
To tie this all together, if you’re getting caught up in all the media hype and fear-mongering, you’re simply misdirected away from the information that really matters. And what matters is what corporations have been doing, what the true economic environment actually looks like, and what the smart money is betting on. The smart money has been betting on stocks because it knows the true economic environment of historically low taxation, low interest rates, mildly increasing but still favorable government regulation of markets, and very favorable foreign trade policy is a strong backdrop for good potential returns. This is why you hired us, to help keep you informed and prevent you from making decisions based upon misleading or misinterpreted information. We will continue to work hard to stay ahead of the curve and keep you moving in the right direction.
For now, we have made some minor adjustments to the model portfolios. While the general environment is still favorable, there is some shifting that is taking place in where we believe the best potential gains may come from. The models have been updated and your portfolios have had the changes made, assuming you’ve given us the required authorization to do so.
Best regards,
Terry Sawchuk
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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