Newsletter Q2 2018
The domestic economy is robust and is not showing any signs of slowing. Job growth is strong and unemployment is low, but we are starting to see some small signs of inflation. A majority of companies are exceeding Wall Street revenue and earnings expectations with the help of lower tax rates and healthy demand. The S&P 500 Index’s valuation is now more attractive than in the first quarter due to the significant increase in corporate earnings. Part of the current wall of worry that the market must climb is a fear of rising interest rates. However, the transparency of the Fed and the small, even increases in rates has ameliorated the reaction to the Fed’s tightening thus far. Between the interest rate hikes and trade/tariff issues, we have experienced a higher level of market volatility throughout 2018 than the unusually low levels of last year. Bonds have, for the most part, produced negative returns this year.
We have used the higher volatility as opportunity to pare back outsized positions and sell less attractive stocks, as appropriate. We are repositioning our portfolios to be able to perform better in the current environment. As contrarians, we are adding to attractively valued international developed market equities, emerging market equities and bonds, and financial and consumer staple stocks. We advocate a “buy the dips” approach and continue to add to high-quality, attractively valued companies that have robust cash flow, strong earnings growth prospects and solid balance sheets.
Overall, Shorepoint’s core philosophy is to manage diversified portfolios of quality, reasonably-valued assets based on your investment objectives and risk tolerance. This has and will prove to be a successful investment strategy over the long-term. We seek to take advantage of opportunities as they arise and generate attractive long-term returns to help our clients reach their financial goals. As always, we are available to discuss your concerns and answer your questions.