View from the Chair: Windermere's Market Perspectives (November 2017)


November has arrived - the month during which we take time to officially give thanks.  In the spirit of the upcoming holiday, let's run through five gifts the markets have bestowed upon investors during the year

1.) Synchronized global growth - 2017 was a year in which virtually every country and every economy experienced positive growth.  This synchronization is very rare and has resulted in gains across both domestic and international markets.  What led to this growth?  A confluence of factors including: accommodative monetary policies, low/stable energy costs, and technological advancements.  Further details on growth rates are shown in this report completed by the International Monetary Fund

2.) Appreciation across asset classes - As you will see in the table, returns for almost all asset classes (MLPs are a notable exception) have been positive for the year.  The growth discussed above and ongoing low interest rates (discussed below) have made this a very encouraging environment for investors



3.) Continued low interest rates - The US 10-year interest rate began the year at 2.45% - and today (November 2, 2017) it rests at 2.3% - despite the US federal reserve bank raising rates and ending bond repurchases.  How have rates not only stayed low, but fallen, in the US?  It is largely the result of other central banks (Europe and Japan) remaining accommodative.  Until we see rates rise around the globe, markets in the US continue to gift us low and steady interest rates, which preserves value in fixed income and does not contribute to disruption in the equity markets

4.) Ongoing innovation and advancement - It's easy to reduce companies to numbers - whether it's the share price on the ticker or earnings results detailed in the newspaper.  But let's not forget what's behind these numbers:  real companies producing valuable services and products for the population.  Reflect back on how your own life has changed in the past year - and the companies that have powered those changes.  Whether it's one-day shipping of that book you have to read, or a new medication someone in your family is taking, or a car that drives itself - the world is changing at an incredibly rapid pace and it's a gift to be able to invest alongside the owners and operators or many of these companies

5.) Ample runway ahead - Perhaps the gift we most appreciate from today's markets is that there seems to be ample runway for continued success ahead.  Global growth is continuing (see estimates in link above for 2018), interest rates remain at low levels (and appear stable), lower regulation and lower taxes are still on the table (and will hopefully come to fruition at some point in the near term), and economic indicators are trending in positive directions.  In addition, we feel strongly that fund flows are also supportive of ongoing growth in equity prices.  Why?  Despite the record performance in US equities, the category has experienced net outflows.  Where has the money gone?  Cash and bonds, and international equities.  As equities continue to advance and as rates rise (eventually), we anticipate money coming back into equities, which should provide more buying demand and support of current valuations.


There are many gifts the market has offered up this year for which we are incredibly grateful.  And as far as we can tell, the positive investment environment should continue for the remaining two months.  So, invest on my friends - and do so with a grateful heart.


View from the Chair: Windermere's Market Perspectives (October 2017)


When reflecting on the current state of the markets and investors, we couldn't help but being reminded of a play many of you likely read in high school english - Waiting for Godot.

It's likely been a few years (or decades) since you last heard that title, so let us refresh your memory.  The play, written by Samuel Beckett, features two characters (Vladmir and Estragon) who await the arrival of someone called Godot, who never arrives.  The play contains many lines expressing their angst from waiting and inaction, including:   *"Let's go. We can't. Why not? We are waiting for Godot," "Nothing happens. Nobody comes, nobody goes," "What do we do know?  Wait," and 'That passed the time.  It would have passed in any case"

What about this play reminds us of today's markets?  In short, we see plenty of investors who appear to be playing the roles of Vladmir and Estragon, awaiting an arrival of something that may never actually appear. 

Over and over, we hear "when will this end, when is the correction coming, when will we experience the market situation we are afraid of?"  News media constantly reports new highs and record earnings, immediately followed by reports and op-eds that it's surely to reverse trend at some point.  Market participants are waiting for their own personal Godot.

We certainly recognize that recent market moves have been unlike anything we have seen in recent time.  As of October 9th, the S&P 500 had gone 333 days without a 5% drop, setting a new record not seen since 1994.  This lack of volatility has also been accompanied by outstanding market growth (see chart below) across almost all asset classes. 

Summary of Market Performance (Sept 2017).jpg

Following all these positive experiences, it's almost instinctive to start waiting - waiting for it all to end, for gains to be reversed, for our fearful thinking to be validated,.  And so, many investors wait - for their own Godot who may never appear.   


What's an investor to do?  Our advice - reject the opening line of the play ("nothing to be done") and accept the fact that there are many actions we can take.  Let's take partial profits from names that have achieved meaningful gains.  Let's redeploy those gains to positions that have underperformed.  Let's ensure we have appropriate downside protection in our portfolios. Let's closely monitor global growth and economic data.  Let's keep moving.  

No offense to Vladmir or Estragon, but no one really likes to wait.   We're not waiting - we're moving forward and investing on.  Care to join us?