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Investment Newsletter - Q1 2016 

Happy and Healthy New Year to all! 

A brief overview of recent market activity and expectations follows below. Our current investment topic is: Using Managed Futures to Lower Volatility.  

We also give you some tips on financial resolutions for the New Year. To sum it up: CARPE DIEM!

You will find past investment articles, and recent stock market commentary and reviews, by clicking on the relevant Quick Links on the right, or peruse past investment topics by clicking the Articles tab above or directly on our website. If there is a topic of interest you would like to see covered in the future, please reply back to this email to let us know, or click here. Likewise, i f you have any questions on this or anything else, feel free to reply back.

Investment Topic:
Using Managed Futures to Lower Volatility
For our investment topic, we focus on how and why managed futures are used to lower the volatility in an investment portfolio. To learn more, please click here

Our Perspective on Recent Market News and Activity
Our synopsis of recent market activity, a look ahead, and putting it all in perspective:

As we start a new year in 2016, it is fair to say that 2015 was a year of disappointment.  2015 represented one of those rare years where traditional asset allocation and portfolio diversification did not work very well.  With many asset classes flat to negative for the year, combined with a few categories that had poor years, (i.e. energy, emerging markets), it was a difficult year to make money.  

Even on the bond side, tax free municipal bonds outperformed taxable bonds by a close to 3% difference in returns.  So for example when looking at bond performance within IRA or 401(k) accounts vs. taxable accounts, many investors saw a noticeable discrepancy.  Even Warren Buffet saw shares in his conglomerate Berkshire Hathaway down 11%, and some of the most historically astute fund managers had "off years".  Over a one year window that can certainly happen, it's not fun when it happens, but we still have strong conviction in long term track records over 1 year anomalies in performance.  
Looking forward to 2016, in reviewing Vanguard (click here), and Invesco's (click here) economic and investment outlooks, we will draw out a couple of key points:
  1. Global growth will remain frustratingly fragile in 2016.  Global trade and manufacturing activity will likely struggle, and additional "growth scares" should be expected. 
  2. At full employment, the U.S. economy is unlikely to accelerate in 2016, yet is on course to experience its longest expansion in nearly a century, underscoring our long-held view of its resiliency.  We believe that those who see an even weaker future of U.S. secular stagnation are too pessimistic and overlook the benefits of an unlevered expansion. 
  3. With the U.S. Federal Reserve (Fed) starting on a series of federal fund rate hikes from Dec.16, 2015, and embarking on a series of "gradual" fed fund rate hikes in 2016, U.S. money and credit markets will be on the path toward normalization after seven years of abnormally low rates.  This a sign that, despite the weakness in other developed and emerging economies, the U.S. is back on the road to normal growth.
  4. The recovery in the U.S. although 6 ½ years old, is only now starting to take on the typical characteristics of a normal recovery: banks have started to provide credit instead of the Fed, business investment is recovering, and consumer spending is regaining its normal momentum.
From a technical perspective, history may offer some cause for hope. According to S&P Capital IQ, since 1945 when the S&P 500 has risen or declined by less than 3% in a year since 1945, in the following year the S&P 500 has risen 80% of the time and has gained an average of 12.8%.
Moreover, the market's performance after an initial rate hike, both in the short term and as far as a year out, has been mostly positive (see the chart below).
Stocks have generally performed well after the first rate hike:
Date of

months before:

months before:

months after:
Mar. '83           
Jan. '87             
Mar. '88

Feb. '94           
Jun. '99            
Jun. '04            

Sources: Strategas, FIAM Capital Markets Strategy Group, as of December 17, 2015. Left chart data is calculated using the S&P 500 before and after the last six initial rate hikes by the Federal Reserve. Right chart data is calculated using the performance of the ten S&P 500 sectors before and after the February 1994, June 1999, and June 2004 initial rate hikes by the Federal Reserve.  Fidelity Viewpoints 12/22/2015. 


Major Market Indices


Below is the Q4 '15 price return performance of some of the major indices:


Index Q4 2015 2015
US Treasury 3 Month T-Bill
0.04% 0.05%
Barclay's US Aggregate Bond Index
Barclay's Municipal Bond Index
0.43% -0.99%
S&P 500 Index
Dow Jones Industrial Average 7.00% -2.23%
MSCI EAFE (International Equities)  4.37% -3.30%
MSCI Emerging Markets 0.26% -16.96%
Russell Mid Cap 
-3.16% -4.02%
Russell 2000 Index (Small-Cap Stocks)
3.20% -5.71%
Bloomberg Commodity Index
-10.55% -24.70%
Credit Suisse Long/Short Equity*
*this data is as of 11/30/15
-1.54% 3.57%
Morningstar REIT Index 6.50% 0.80%

Quick Links

Our current  investment topic: 

Using Managed Futures to Lower Volatility

Stay Connected
Financial Resolutions in the New Year - CARPE DIEM!

As a new year begins, it is often a time that people are reflective, and look to make resolutions for positive changes going forward. Many people use the expression "carpe diem" ("seize the day") to inspire them to make the most out of the day. We thought we would apply that for helping to set your financial year for success:

Create a plan: A basic plan will include explicit, attainable actions, specifically stating how to get from Point A to Point B.

Assess your situation/portfolio:  Are you actively saving and investing to reach your goals? It is not too late to get your savings and investing on the right track. 

Re-assess your situation/portfolio and adjust as needed:  The only constant in life is change. We cannot direct the wind, but we can adjust the sails.

Prepare for the unexpected and the unavoidable:  Do you have a will, living will, health care proxy, etc.? Enough insurance coverage?

Emergency fund: Things happen. There should be money not invested in stocks or bonds that is easily accessible, that can last a number of months.  

Discipline: Maintain perspective and long-term discipline. Do not over-react to short-term events. Ignore the temptation to chase last year's winner.  

Implement the plan: The best plan will do you no good unless you take action and implement it. "A journey of a thousand miles begins with a single step." 

Efficient: Manage your portfolio for tax efficiency. It's not what you make, but what you keep. 

Monitor and Track:  "I have a sound plan and implemented it. Can't I just leave my portfolio alone?" You or your advisor needs to make sure that you are proactive and reactive, when needed. A loss avoided can be better than a gain.

On the Investment Horizon
Upcoming Key Dates on the Economic Calendar 

  • First Friday of each month: Unemployment report for the prior month, released at 8:30AM.
  • Monday, January 18: Stock market closed in observance of Martin Luther King, Jr. Day. 
  • Tuesday January 26 - Wednesday, January 27: The Federal Open Market Committee (FOMC) meets, and releases their announcement on Wednesday at 2PM. 
  • Monday, February 15: Stock market closed in observance of President's Day. 
  • Tuesday March 15 - Wednesday, March 16: The Federal Open Market Committee (FOMC) meets, and releases their announcement on Wednesday at 2PM. 
  • Wednesday, March 16 at 2:30PM: Fed Chair Janet Yellen to hold her quarterly press conference to explain the FOMC's latest quarterly economic projections. 
  • Friday, March 25: Stock market closed in observance of Good Friday. 

If you desire an appointment, have any questions on any of this material, or any other financial subjects may relate to your own financial circumstance, please reach out to us at the contact information below:






Brian Cohen, CCO; email:; phone: 631-923-2487
Joe Favorito, CFP®; email:; phone: 631-930-5336

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