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

I recently attended a presentation by Liz Ann Sonders, Schwab's Chief Equity Strategist.  We have seen her speak many times in the past, and like usual, Liz Ann provided a dynamic illustration of economic data (both soft data, like sentiment, and hard data, like employment and leading indicators) - all of which signal ongoing strength in the equity markets and no imminent danger of a recession.  During the Q&A, my table mate and I both asked "optimistic" questions - what sectors does she view as outperfoming (answer: health care, technology, and financials) and what indicator does she feel does the best job predicting the future of the US market  (Leading economic indicators - trend in them, not just absolute levels).  After we asked the questions, Liz Ann stopped and said this was the first time she could recall that anyone asked questions of an upbeat nature - either during her live events or in daily interactions with Schwab clients.  She said, despite a now 8-year bull market with record gains in US equities, virtually every question or comment she gets has a pessimistic undertone - "when will this all end?  Isn't this all a rigged game?  When is it safe for me to get into the market?  When can we expect 2007/2008 to repeat itself?  Isn't this Trump rally bound to reverse?"  

After that presentation, I couldn't help but wonder - what if investors were asking the opposite questions?  What impact is this insurmountable wall of worry having on the market?  One slide she shared clearly illustrated at least part of the impact - since 2008, there has been net outflows in equities (with the funds going to fixed income and cash).  

At Windermere, we remain in the optimistic camp.  The below chart of returns year-to-date shows plenty of reasons to be in the "glass half full" camp as markets continue to advance virtually across the board.

We continue to see many ways to grow wealth in US equities, as well as in other asset classes including international equities, certain areas of fixed income, and alternatives (with the mix governed by each individual's asset allocation).  We believe strongly that the opportunity to grow wealth in a risk-adjusted fashion is a gift and a significant source of empowerment that should not be overlooked.  We understand there are risks.  We understand there is a lot to know.  We understand that nothing in guaranteed.  But to us, that sounds a lot like virtually ever other area of life.  So, why not ask the opposite questions...

"How much wealth can I generate from my investments - for my family's future?  

What businesses stand the greatest chance of rising in value?"

What assets are undervalued in today's markets?

What is the next big thing - and how can I invest in it now?

What businesses would I like to own a share of and invest along with the best and brightest CEOs and management teams? 

Who can I align myself with to guide me thru this journey?"  

We're committed to asking the optimistic question and seeing where it takes us.  Who's coming with us?

Invest on friends,