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PORTFOLIO MANAGER INSIGHTS
WEEKLY INVESTOR COMMENTARY | 9.1.21
Investment Committee

A common adage in boxing is to watch your opponent’s shoulders and not their hands. Focusing on where the motion of a punch begins, rather than where it ends, allows you to react appropriately and accurately. The same is true when investing – it’s better to focus on the economy and long-term trends that drive markets and policy, rather than solely on outcomes such as Fed decisions and past returns. In other words, the best way for investors to position their portfolios today is to better understand where we are in the business and market cycles.

The path to normal monetary policy by the Fed and other central banks is a long one. During the last cycle, the Fed officially announced plans to taper its asset purchases at the end of 2013, began raising rates at the end of 2015, and did so until the second half of 2019. The Fed was just as measured in its approach after the dot-com bust when it raised rates slowly but steadily across 17 consecutive meetings from 2004 to 2007. The onset of tapering, and even the first rate hike in a cycle, is just the first step.

It is still early in the bull market and expansion

KEY TAKEAWAYS:

1. The average market cycle has lasted between 5 and 12 years over the past 40 years.
2. Although the recovery has been swift, growth trends suggest that the market cycle can still go a long way..

Today, market participants widely expect a change in policy, especially after Fed Chair Powell’s recent Jackson Hole speech. This is because economic conditions are favorable and although the pace of growth may slow a bit, the expansion is still robust. As a result, corporate profits are accelerating further. Consensus estimates are for S&P 500 earnings-per-share to reach almost $198 in 2021. This would represent a staggering 46% annual growth rate and help to support markets by bringing valuation levels back down to earth.

In broader terms, investors are accustomed to distinguishing between cyclical and “secular” (financial industry jargon for “long-term”) trends. Cyclical trends are those related to the natural ups and downs of the business cycle, such as those stocks and sectors that benefit from initial recoveries versus the later stages of an expansion. Secular trends are those that cut across cycles, such as trends in technology and global trade.

Economic growth is expected to be strong

KEY TAKEAWAYS:

1. Last week’s upward revision to Q2 GDP showed that the economy grew by 6.6% during that quarter.
2. The economy is expected to grow at a robust pace before it inevitably decelerates to more historically normal levels.

What’s made this distinction challenging has been the sharp initial recovery that boosted inflation and growth measures well beyond recent norms. There is a great deal of debate over whether these data are a result of cyclical or secular trends. The best answer today seems to be neither: these may simply be one-time events due to the nature of the crisis and rebound. While some effects, such as supply and demand disruptions in semiconductors or building materials, may linger for months, this is different from arguing that there are cyclical forces that will boost inflation for years to come.

In the end, it’s important for long-term investors to remember that crises are swift and abrupt while expansions are slow and steady. The National Bureau of Economic Research has officially declared that the COVID-19 recession lasted only 2 months. The markets bottomed out over the course of one month and recovered about 5 months later. In contrast, this bull market has now lasted almost a year and a half, and bull markets since the 1980s have lasted between 5 and 12 years.

Valuations are not cheap but may come down over time

KEY TAKEAWAY:

1. Valuations across the broad market have been high due to the fast market recovery. However, strong and accelerating earnings are helping to deflate these lofty valuations.

It’s natural for investors to want to know exactly what’s around the bend, and to react to every event. But like the boxer who bobs and weaves too much in response to their opponent’s gloves, investors may only tire themselves out. Focusing on the underlying economic trends helps investors avoid having a short-sighted view of their portfolios. Investors should focus on the overall business cycle and long-term trends rather than day-to-day events.

Historical references do not assume that any prior market behavior will be duplicated. Past performance does not indicate future results. This material has been prepared by Kingsview Wealth Management, LLC. It is not, and should not, be regarded as investment advice or as a recommendation regarding any particular security or course of action. Opinions expressed herein are current opinions as of the date appearing in this material only. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate their ability to invest for the long term. Investment advisory services offered through Kingsview Wealth Management, LLC (“KWM”), an SEC Registered Investment Adviser. (2021)

MarketWatch interviews Paul Nolte, SVP & Sr. Portfolio Manager

Kingsview SVP Paul Nolte discusses the effects of easy monetary policy on U.S. stocks, tech stock valuations and investor expectations of the next 12 months and beyond.

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Opportunity Income Aims To Help Investors Meet Overall Fixed Income Goals

Kingsview Investment Management (“KIM”) today announced the launch of their Opportunity Income (OI) strategy, which was designed with the goal of optimizing allocations across various fixed income sectors. Opportunity Income’s primary objective is to deliver a better risk-adjusted return than the aggregate bond benchmark by analyzing spreads between short and long-term U.S. treasury bonds.

Investors seeking a “permanent” active fixed income allocation to balance the risks of investing in equities may find Opportunity Income of interest. It is a potential solution for investors wondering what to do right now in the fixed income portion of their portfolios, but might be worried about key bond risks such as inflation, rising rates, or even economic uncertainty.

“‘We’re excited to share this strategy with investors because we understand how challenging fixed income can be to invest in at times like this.” – Paul Nolte, Senior Vice President and Co-Portfolio Manager

Opportunity Income’s philosophy reflects KIM’s belief that a historically informed, fundamental approach to core fixed income investing can provide long-term superior risk-adjusted return. The strategy was designed with these elements in mind:

Passive ETF Selection – Investments consist of Core Fixed Income exposures derived via low-cost ETFs like that of the benchmark at times but can span a variety of classifications, quality, and duration. At times, the portfolio may take key exposures away from the benchmark in an attempt to optimize for the current environment.

Risk Management – Opportunity Income is an overall risk framework, helping to guide fixed income asset allocation throughout the interest rate & credit cycle by analyzing current treasury spread positioning.

Consistency – Fixed income asset class risks, returns and correlations may vary depending on where you are in this cycle. Historically there are possibly more opportune times to overweight or underweight the different fixed income exposures.

“We respect the importance of keeping a longer-term outlook while still protecting against the risks of tomorrow.” – Mitch Ehmka, Director of Trading and Co-Portfolio Manager

Many strategies try to be forward-looking, guessing where interest rates may be headed, or strictly investing in certain asset classes, regardless of the current interest rate or risk environment. Opportunity Income does not try to guess, but instead analyzes where we are in the interest rate cycle and invests in those securities that have historically performed well in those environments. The overall portfolio is adjusted once a month but keeps pace as economic conditions change.

Read more about Kingsview Investment Management’s portfolio strategies at https://kingsviewim.com/strategy-cards/.

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About Kingsview Partners

Kingsview Partners is a unique alternative in a crowded field of financial advisory offerings. The firm holds a simple belief that quality of service, knowledge of subject matter and fairness can all coalesce into a successful business. Dedication to their clients’ welfare serves as a foundational trait, and one deeply entrenched within the cultural fabric of Kingsview. For many, the financial services industry has fallen dramatically short of meeting their needs, but Kingsview aims to do better and is dedicated to “Elevating the Standard of Care.”

To achieve this mission, Kingsview Partners operates Kingsview Wealth Management, a fee-based, Registered Investment Advisor serving thousands of individual clients across the nation. Complementing the firm’s advisory business is their full-service insurance agency, Kingsview Trust and Insurance Services. Finally, Kingsview Partners works to ensure clients have access to high-value, low-cost, professionally managed investments via Kingsview Investment Management, a standalone asset manager providing investment portfolios to meet nearly any client need.

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Important Disclosures

Kingsview Wealth Management (“KWM”) is an investment adviser registered with the Securities and Exchange Commission (“SEC”). 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.

Kingsview Investment Management (“KIM”) is the internal portfolio management group of KWM. KIM asset management services are offered to KWM clients through KWM IARs. KIM asset management services are also offered to non KWM clients and unaffiliated advisors through model leases, solicitor agreements and model trading agreements. KWM clients utilizing asset management services provided by KIM will incur charges in addition to the KWM advisory fee.

This material has been prepared by Kingsview Wealth Management, LLC. It is not, and should not, be regarded as investment advice or as a recommendation regarding any particular security or course of action. Opinions expressed herein are current opinions as of the date appearing in this material only. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate their ability to invest for the long term. This information does not address individual situations and should not be construed or viewed as any typed of individual or group recommendation. Be sure to first consult with a qualified financial adviser, tax professional, and/or legal counsel before implementing any securities, investments, or investment strategies discussed.

The is an index designed to provide a measure of the performance of the U.S. investment grade bonds market, which includes investment grade U.S. Government bonds, investment grade corporate bonds, mortgage pass through-securities and asset-backed securities that are publicly offered for sale in the United States. The securities in the index must have at least 1 year remaining to maturity. In addition, the securities must be denominated in U.S. dollars and must be fixed rate, nonconvertible, and taxable.

Kingsview SVP Paul Nolte discusses gas prices, the housing market, and retirement plans for Millenials.

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SVP and Portfolio Manager Paul Nolte discusses the flattening of the yield curve, and how the markets view the economy.

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PORTFOLIO MANAGER INSIGHTS
WEEKLY INVESTOR COMMENTARY | 8.25.21
Investment Committee

Markets are increasingly concerned about tighter monetary policy by the Fed and its impact on valuations, interest rates and more. Recent FOMC meeting minutes confirmed that the Fed could slow its balance sheet expansion within the next few months and this week’s virtual Jackson Hole Economic Symposium could provide more clarity around future rate hikes. How can long-term investors navigate the policy changes and economic uncertainty that lie ahead?

Since at least 2008, the Fed has dominated market conversations across the investment industry, and the recurring discussions around tapering and tightening can often feel like déjà vu. In order to understand the Fed, it’s important to first understand business cycles, no two of which are exactly alike. When the economy is expanding, it’s entirely normal for the Fed to lightly touch the brakes by slowly raising rates and by managing its balance sheet.

The Fed will likely begin reducing its asset purchases soon

KEY TAKEAWAYS:

1. The Fed’s balance sheet has expanded dramatically over the past 18 months – nearly doubling from its post-2008 level.
2. With the economy back to pre-pandemic levels, it’s likely that the Fed will begin slowing its asset purchases soon.

The Fed has done this, to varying degrees of success, across the 15 boom-bust cycles since the Great Depression. There were a variety of causes for each recession, from asset bubbles to debt crises, which resulted in different recoveries and subsequent expansions. For instance, it’s well known that the 2008 global financial crisis was the result of a housing bubble and over-leveraged financial system which required years to sort out. In contrast, the current recovery has been swift since many businesses have been able to reopen following lockdowns and vaccination efforts.

The nature of the pandemic and the speed of the recovery have made economic forecasting challenging to say the least. Many measures of inflation are at their highest levels since the early 1990s. Unemployment is falling sharply as an average of 500,000 jobs have been added each month this year. Manufacturing activity is red hot and while retail spending has slowed, car and home prices remain elevated. It’s difficult to say with accuracy how much of this economic boom will continue.

Investors should always be ready for market volatility

KEY TAKEAWAYS:

1. Despite daily swings, the largest intra-year decline has only been 4% in 2021. This is far below average.
2. With valuations and Fed uncertainty both elevated, investors should stay balanced in order to navigate markets in the months to come.

What is certain is that we are still early in the business cycle and market prices are factoring in a strong expansion. With the economy above pre-pandemic levels and the stock market 32% past its pre-lockdown peak, it’s natural for the Fed to consider returning to its own pre-pandemic policies. At the end of 2019, the Fed was shrinking its balance sheet and the federal funds rate was at 1.5%. To be clear, tapering means that the Fed will continue to grow its balance sheet, just at a slower pace.

Given this backdrop, there are many reasons for investors to be optimistic and stay invested. However, it’s also prudent to be prepared for greater uncertainty. This can occur in a few ways.

Fixed income still plays an important role in portfolios

KEY TAKEAWAY:

1. Although rising rates rattled many parts of the bond market earlier this year, the asset class still plays a substantial role in stabilizing portfolios.

First, there may be larger swings across the stock market on a day-to-day and week-to-week basis. For instance, the most recent market pullback of 1.7% was concerning to some investors, but this proved to be shallow and short-lived. As always, it’s important for investors to remember that short-term pullbacks are both normal and completely expected. What is unusual is that the largest peak-to-trough decline in the S&P 500 this year has only been 4%. Managing larger swings with a diversified portfolio, especially with valuations at multi-decade highs, is more important than ever.

Second, it is likely that interest rates will continue to rise over the coming quarters and years. While the first half of the year showed that rates almost never move in a straight line, the ongoing economic expansion and tighter monetary conditions should push rates higher over time. In general, this is good news for savers who depend on portfolio income. And while it may create tighter conditions for borrowers and mortgage-holders, economic data suggest that the average consumer is in a strong position.

Third, fixed income continues to be an important diversifier when managing portfolios. Although many bond sectors were shaken by the rapid rise in interest rates at the start of the year, some parts of the market have since recovered. Bonds will likely still help to stabilize portfolios in uncertain times, regardless of the interest rate backdrop.

It’s more important than ever for long-term investors to have a solid financial plan and well-considered portfolio.

Historical references do not assume that any prior market behavior will be duplicated. Past performance does not indicate future results. This material has been prepared by Kingsview Wealth Management, LLC. It is not, and should not, be regarded as investment advice or as a recommendation regarding any particular security or course of action. Opinions expressed herein are current opinions as of the date appearing in this material only. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate their ability to invest for the long term. Investment advisory services offered through Kingsview Wealth Management, LLC (“KWM”), an SEC Registered Investment Adviser. (2021)

Principal Martin Harper Joins Kingsview Partners Office in Woodbury, NY

Kingsview Partners is pleased to announce that that Broadway Financial, a New York-based RIA, has merged with the firm effective August 20, 2021. With this partnership, Kingsview also welcomes Broadway’s principal, Martin Harper, to the Kingsview Partners team.

Kingsview Partners is proud to support this merger both logistically and financially on behalf of their wealth management partners Jonathan and Ian Millman of Woodbury, NY. Mr. Harper will remain a registered investment advisor representative with Kingsview and will continue to provide exceptional service for his clients alongside Jonathan and Ian.

Kingsview Wealth Management’s capabilities and the professionalism of Jonathan and Ian Millman made Mr. Harper’s selection of a new home for his valued clients an easy decision. The firm’s fiduciary model will allow Mr. Harper a truly independent platform to offer sophisticated wealth management services.

Sean McGillivray, CEO of Kingsview Partners, says, “The ability to organize and fund a merger between a Kingsview advisor and an outside RIA continues to be a growth objective for the firm. It is consistent with our desire to serve more clients in a meaningful way while supporting our advisors’ efforts to grow their individual businesses. The entire team at Kingsview welcomes Martin and his clients to the Kingsview family. I couldn’t be more proud of the entire effort as we support clients and advisors alike.”

Senior VP Paul Nolte, a Senior VP talks about bitcoin, supply chain issues, and the struggle to get materials. He also discusses how workers currently have a little more leverage and negotiation power due to an employee shortage.

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Kingsview SVP Paul Nolte discusses why the U.S. central bank will influence markets more going forward, and why they can’t seriously raise rates.

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Reuters interviews Paul Nolte, SVP & Sr. Portfolio Manager

Kingsview SVP Paul Nolte discusses the global economy’s growth outlook and Fed tapering.

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