Quarterly Commentary

Q3 2017 Commentary

The KISS principle–Keep it simple, stupid—admonishes engineers to avoid unnecessarily complex designs. It’s also pretty good advice for anyone trying to explain the ups and downs of the stock market. In that spirit, there is a simple explanation for the U.S. stock market continuing to achieve record highs. Share prices are tightly linked to corporate profits, and bottom lines happen to be booming. For the twelve months ended March 31st of this year, S&P 500 earnings jumped 16.0%. For the quarter just ended, the corresponding number may come in at a whopping 22%1.

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Q2 2017 Commentary

For the better part of the last five months global stock markets have been on a roll. From last November’s presidential election through the end of the first quarter the S&P 500 Index climbed over 10%. Developed markets outside the U.S. rose even faster, gaining more than 12%. Conventional wisdom attributes the market gains to optimistic views of President Trump’s economic agenda. Accumulating evidence suggests, however, that markets may be reacting to something else.

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Q1 2017 Commentary

Twelve months ago, the stock market was in the midst of a sharp decline. By last February’s bottom, the S&P 500 Index had fallen over 11% on the year and 14% from its November 2015 high. That episode reminds us of several points that would be well to keep in mind at the current juncture. One lesson is that markets have a tendency to overreact. Another is that market corrections (a decline of more than 10%) are not unusual.

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Q4 2016 Commentary

From time to time, instead of devoting these pages to a recap of recent events in the economy and capital markets, we take a deeper dive into a specific issue. This quarter we examine the connection between aging populations and slowing global economic growth.

As we enter the final quarter of 2016 it appears that the global economy will decelerate for the fifth time in the last six years. Since 2012 global GDP growth has averaged around 3.2%, almost half a point lower than the 3.6% post-1990 average. While the shortfall is modest, it has been persistent and it’s worth trying to understand why.

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Q3 2016 Commentary

Should the United Kingdom remain a member of the European Union or leave the European Union?  Three weeks ago, on June 23rd, that question was put to the British electorate.  Markets opened the day confident voters would choose Remain.  Investor optimism was due in equal part to:  polls leaning slightly in that direction, a tendency for voter interest in risky referendums to fade in the voting booth, and plain old wishful thinking.  In the end, by a margin of 52% to 48%, British voters chose Leave.  The unexpected “Brexit” vote rattled financial markets and sent headline writers into overdrive.

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Q2 2016 Commentary

Early in the first quarter and for the second time in just over six months, global stock markets fell precipitously only to rebound sharply and recover almost all of the lost ground. Last summer the S&P 500 Index plunged by 13% in five trading days before climbing almost all
the way back in September. By comparison, January’s decline was more leisurely, with the index shedding a bit under 13% over three weeks, then rebounding sharply from mid-February to the end of March, at which point it was up a scant 0.8% on the year.

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Q1 2016 Commentary

The first weeks of a new year bring prognostications regarding the twelve months ahead. We’ve never put much stock in these predictions, but as we think about the investment landscape for 2016 (and the years beyond), there are a number of questions that strike as particularly significant. These are the issues we are paying close attention to and that we think about in managing client portfolios. If we had a crystal ball—and sadly we don’t—we’d use it to answer the following:

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