The Markets

Jan 4, 2014 | Blogs, Daily Financial

Terrry Sawchuk Financial Advisor Terry Sawchuk
Founder & Chairman

I’d say happy New Year, but it’s currently 5 degrees outside and in about 12 hours, another snowmageddon will arrive, courtesy of our friends in Siberia.  It feels a little like telling Kwame Kilpatrick happy New Year, as if he’s got much to look forward to.  Either way, the New Year is upon us, and unlike Kwame, once this bitter cold stretch moves along; there is plenty for us to look forward to.

Economically speaking, it’s undeniable that the environment has steadily improved. That’s not to say we are anywhere near where we would like to be, just that it’s better than it was. Third quarter GDP was revised to over 4%, a number we haven’t seen since before 2008. The auto companies sold more cars than in any year since 2008 another sign of improvement. Unemployment is closer to 7%, I know I know, that may not be the “real” number, but any way you slice it, it’s a stark improvement over where we were just a few years ago. The bottom line, things are better than they were.

As for what lies ahead, well your guess is as good as ours. Here is what we do know: the Fed has begun the tapering process, albeit, in a very measured and deliberate manner. Tapering, essentially the winding down of bond purchases by the Federal Reserve, suggests that the Federal Reserve Board thinks the overall health of the economy has improved enough to merit reducing financial stimulus. It suggests that the worst may be over, at least in their minds. Either way, with Janet Yellen taking over for Ben Bernanke, it does appear that if things change, the Fed will continue to be vigilant in supporting the economy, and indirectly, the markets. For now, that means that equities will continue to comprise a significant portion of our model portfolios. There will always be potential trouble spots along the way, but we believe that short-term volatility is impossible to predict or avoid, and therefore tolerated. We’ve always handled short-term volatility through diversification, and that won’t change. The algorithm is designed to help detect and avoid more serious, longer-term danger and presently suggests the coast is clear allowing us to stay committed to our current equity percentages.

Speaking of the algorithm, once the kinks were worked out, it has been useful in keeping us invested, and helped identify investments that performed well. With a couple of exceptions, we were very pleased with its overall functionality and results. Furthermore, as the year went on we became more comfortable with the best application of the algorithm as it relates to the way we manage money for our clients. In looking ahead to 2014, we are optimistic about the overall trend of the markets, there will be bumps, there always are, but at first glance we tend to see more positive than negative.

In the meantime, we have made some minor adjustments to some of the models that we manage, and the website reflects those changes. We’ve only updated two portfolios the others have remained exactly the same. As always, if you’re on the automatic change plan, we’ve already adjusted your portfolio as of this time. If you’re not on the auto change plan then please send us an email or call us to give us permission to update your models.

Best regards,

Terry Sawchuk

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