KIM Investment Committee Market Summary – Q2 2018 Mid Quarter

Kingsview Asset Management’s Investment Committee members Scott Martin, CIO, and Paul Nolte, SVP, discuss the recent KIS portfolio changes and reveal our analysis on current trade winds in the markets.

KIM Investment Committee Market Summary – Q1 2018

The Markets
The capitalist party of 2017 lasted through January and the ensuing hangover sure has been one we would like to forget. A market correction had been expected for quite some time, but when it finally came, it surprised everyone with its rapid and violent moves. This was especially evident towards the end of the quarter after wild market movements had calmed down a bit, with the major averages moving over 2% for a handful of days to close out the month of March.

Through recent experiences in history, investors have been conditioned to buy the dips. From the high yield bond scare to Brexit, all the way to the Trump election result, each said decline was met with eventual buying interest that pushed stocks to new all-time highs. Similar to those noted opportunities, much of what the market has been worried about of late seems to be the political risk and rising fear of the “worst case” economic scenario. However, that may be again misplaced as it can be argued that the fundamental outlook is better today with interest rates remaining low, and corporate earnings set to rise by over 10% due to the 2018 corporate tax cut. The big question is whether the cut will notably affect consumer behavior and spark additional spending and therefore inventory building/rising production on behalf of the companies in the S&P 500.

The Economy
Trade reform, which was once on the bottom of the economic “to do” pile, has rocketed straight to the top given the recent angst over proposed tariffs and sanctions. If the focus is strictly on trade, the U.S. is indeed losing, suffering the largest trade deficit in 20 years just last month. Outside of the trade arena, the economy continues on its growth path near 3% annually, and monthly job growth is averaging around 200K. Perhaps augmenting the economic backdrop in early April will be an earnings season that should be very revealing. While the positive slope to earnings this year in light of the tax bill will be a welcome sight, more important are comments on the trade dealings, should they surface.

The Portfolio
Some portfolio positions were increased when the markets first fell in early February. Since then, trade talk has roiled the markets, but the economic and fundamental impact is hard to measure as adjustments are constantly being made to the possible tariff implementation. Interest rates remain an area of focus as they relate to our allocations, given that valuations in the U.S. remain at elevated levels. International valuations, however, remain inexpensive with emerging markets remain attractive relative to their historical ranges. We continue to review our holdings for opportunities to increase those positions toward their maximum weights given an appropriate level of risk.

Kingsview Asset Management, LLC (“KAM”) is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

KIM Investment Committee Market Summary – Q1 2018 Mid-Quarter

Scott Martin, CIO and Paul Nolte, SVP and Portfolio Manager of Kingsview Investment Strategies discuss recent market volatility.

KIM Investment Committee Market Summary – Q3 2017

The Markets
The day to day movements of the markets during the third quarter required magnifying glasses to actually see them. On average, the daily movement amounted to just about 20 Dow points. Only 4 of the 58 trading days saw a 200-point or more move. With a rather volatile political backdrop, investors are wondering how stocks managed to rise during the quarter. Since October has been the most volatile month historically, we could get an answer soon!

The Economy
It has been said that economists were created to make weathermen look good. The final quarter of the year will likely be more affected by the weather than anything “done” by companies, the Fed or Congress. Hurricanes Irma and Harvey are likely to impact much of the economic data, clouding the “real” economic activity for at least a few months. The most recent employment report is just one example, as the economy “lost” 33,000 jobs. Much of the job loss was in restaurant/food service. Inflation and wage growth jumped as well as overtime and use of scarce resources to get back to normal will likely keep the talk of higher inflation front and center for the Fed. We are trying to see through the storms to a sunnier day, but the economic data may not be cleared up until late in the fourth quarter.

The Portfolio
We have recommended taking some of the gains achieved this year and reallocating some to the safer bond/money market instruments while also favoring the better opportunities overseas. Valuations in the US remain elevated and higher than most anytime in history. What gives us pause about being too aggressive in the US equity market is that many sectors and asset classes are simply not attractive from a price standpoint. International valuations however, remain inexpensive with emerging markets still cheap relative to their historical ranges.

Kingsview Asset Management, LLC (“KAM”) is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

KIM Investment Committee Market Summary – Q2 2017

The second quarter was marked by a very slow and steady rise in stocks, save for one 300-point Dow drop. Daily volatility has generally declined as investors begin to accept the fact that the Fed will be raising rates amidst an economy that is just “bumping along.” This is because the economic data remains much as it has over the past year; good but not great, neither weak or strong. Earnings will continue to rise if corporate America can continue to cut costs and repurchase shares. Given the recent weakness in both economic and inflation data, the Fed just might stand down until year-end, keeping rates below where they thought they would be, come December.

The Fed is watched closely by the markets, as press conference comments or Q & A sessions with Fed Governors have moved stock prices in both directions. They continue to stick to their script, even though the economic data has not really changed (for the better or worse) since year end. Following their most recent hike in June, Chair Yellen felt the low inflation we are experiencing is “transitory”, as she sees building wage and inflation pressures in various parts of the economy. So far, the data has not supported her comments. Whether looking at headline inflation, core (without food and energy) or various “median” measures that attempt to smooth the volatile data, inflation trends are lower. If we are to see a continuation of higher interest rates, we would expect to see inflation persist above the Fed’s 2% target for more than just a month or two.

The second quarter was much like the first, slow growth and weaker than expected data points in many parts of the economy. Washington continues to struggle to pass legislation that investors had banked upon early in the year, pushing out any potential benefits until 2018 at the earliest. Economists, notoriously poor at guessing data points, were disappointed during the second quarter as many of the “surprises” in the economic reports were negative.

Consumers on the other hand, remain optimistic about the economy today, however they are much less so about the future. Finally, coming off a good earnings season, this summer may test investor’s mettle as near record high margins generally portend weaker earnings growth going forward. Overall our views on the economy growth remain modest without the specter of a recession yet on the horizon.

The markets, as we outlined last quarter, moved generally sideways until June, when they began their current leg higher. Even in the face of higher rates pushed by the Fed, bond market performance has kept pace with stocks since the end of February. The recent push higher by stocks could be the validation of a “summer rally”, however we are tempering our enthusiasm given the already very high valuations. If the Fed indeed steps aside from raising rates much of the remainder of the year, stocks could continue to plod higher as investors continue to search for something more than the 1% returns offered by short-term bonds.

Kingsview Asset Management, LLC (“KAM”) is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.