View from the Chair: Windermere's Market Outlook (April 2016)

Congratulations are in order.  You have endured a very exciting (albeit challenging) quarter in the markets.  The returns for the quarterly period (as highlighted in the table below) don't come close to telling the full story - one of a sharp and sudden decline in January/early February, followed by a marked rebound in March.  

As we said all throughout this period, it was our opinion that the best course of action was to stay the course and stay invested.  We recognize how challenging that is in today's world - where the 24-hour news cycle is one primarily based upon shock and fear and constantly presents warnings, negative data points, and endless areas of concern.  

However, we all have a choice regarding what we focus on and what we believe.  So our advice?  Choose a positive thought.  Drown out the noise and fiercely focus on the many reasons to be optimistic about your investing future.    

From where we sit, we see many positive thoughts to choose from.  Here are just a few for you to consider as you continue on your investing journey.

Energy prices - While energy prices are off their lows, they remain at historically low levels.  This provides an important advantage to companies and sectors for which energy comprises a large component of their input costs (think airlines, transports, and heavy manufacturing).  Also, as I'm sure you've seen at your last trip to the gas station, this is also a victory for consumers and the sectors that will benefit from consumers allocating those savings elsewhere (think consumer staples and discretionary)

Dividends - As interest rates remain at muted levels (and show few signs of materially increasing in the near future), investors are still able to obtain strong yields from many equity securities.  These dividend streams provide both current cash flow (if needed), as well as nice stabilization during market downturns

Inflation - Historically low levels of inflation are assisting the building of real wealth at record paces.  While nominal rates certainly matter, the level of real return (ie: the return in excess of inflation) is the key to long-term wealth building over time - as purchasing power must be maintained

US Dollar Stabilization - the USD is off its highs and shows some level of stabilization.  While this is bad news for those of us with international travel plans this summer, it's great news for US companies looking to export overseas and should also help with earnings reports going forward (due to more favorable translation of foreign sales), as well boost valuations of US based investors' investments in international markets 

Are we telling you everything is "perfect" in the markets?  Far from it.  There are countless factors that could present challenges for the markets at any given point.  Chief among them are anticipated softness in reported revenue/earnings, the pending uncertainty regarding the presidential and congressional/senate races, pronounced weakness in European banks, the possible exit of Britain from the EU, and the terrifying and ever-present threat of terrorism.    

We can never turn a blind eye to the risks.  They are a reality and must be given due consideration.  However, there is just as must reason for optimism and hope.  So try it -  Choose a Positive Thought.   You may just be surprised at the difference it makes.