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Investment Newsletter - Q1 2017 

Happy and Healthy New Year to all! 

A brief overview of recent market activity and expectations follows below. Our current investment topic is: " How To Understand Municipal Securities" .   We also have a recap of the performance of major market indices from the past quarter and for the year, some financial quotes through the years you may find of interest below, as well as the upcoming economic calendar. 

What a crazy year 2016 was.  It was a year that started with the worst January in stock market history, saw turmoil with the Brexit vote and U.S. Presidential vote, and yet still managed to pull out a positive return for the year. We put in our perspective and others in more detail below

You will find past investment articles , and recent stock market commentary and outlook , 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: How To Understand Municipal Securities
For our investment topic, " How To Understand Municipal Securities", we attempt to give a high-level overview of the topic in less than 2 pages. To learn more, please click here

Our Perspective on Recent Market News and Activity

Our synopsis of 2016, a look ahead, and putting it all in perspective:

What a wild year 2016 was for investors and the markets.  2016 started off for a period of time as the worst January in stock market history, falling 6.2% and continuing a decline that had started in the fourth quarter of 2015.  The Dow bottomed at 15,660 on February 11, a two-year low, having fallen 10% from the end of 2015.  U.S. crude-oil futures also hit their 2016 trough that day settling at $26.21.  Despite the gloom and doom, March saw the markets come roaring back to a point where despite all of the early volatility by the end of the first quarter of 2016 the market was slightly positive. 
The summer then produced an incredible jolt; the Brexit vote and the shock of Great Britain announcing it would be leaving the European Union.  Markets reacted strongly, going down close to 1,000 points over a three day period, but again showing remarkable resiliency by roaring back within only a few days time frame.  The remainder of the summer produced incredible tranquility with an extended stretch of time without a 1% move up or down in the markets.
Lastly, another potential jolt to the markets: the Donald Trump presidential election victory over rival Hillary Clinton, which to many people's surprise, led to a very strong year-end rally on the stock side.  The Dow's 8% gain in the five weeks after Donald Trump's victory was the biggest surge following any U.S. presidential election in history, leaving markets on the doorstep of Dow 20,000.  The Dow Jones Industrial Average posted its best performance since 2013 fueled by an improving economy and hopes for more business-friendly policies under a new president.  Fixed income investors did not benefit as much, as yields climbed culminating in the second rate increase by the Fed since 2006 and the only increase for the year in 2016.  Despite the rise, Treasury yields are still low from a historical standpoint.  The 10-year yield is less than half its trading level in 2007. Indeed, it was a wild ride in 2016 for investors, which comes with the territory of being invested.

As for Q1 2017, what can we expect?  Well the answer to that question over short periods of time is really always just going to be a guess.  However, there have been five other instances in which the Dow jumped at least 5% in a five-week period following a presidential election.  Over ensuing six-month time frames, it continued rallying four of five times, gaining another 10% on average.  The most recent example came in 1996.
Some key themes:
From Eaton Vance: Inflation Returns:
The major secular investment theme during the past eight years was global deflation.  However, the post-bubble secular period of deflation and slow nominal growth now seems to be ending, and re-inflation could be a prime investment theme for 2017.
From BlackRock: Low Returns Ahead:
Economic boom times look unlikely to return. While our economic view is comparatively optimistic, the global economy's capacity for rapid growth looks to have been severely dented. Aging populations, weak productivity growth and excess savings are conspiring to deprive many economies of the raw ingredients they need to fuel a major upswing. This will invariably suppress potential investment returns.
From Invesco:
Under Donald Trump's leadership, US gross domestic product (GDP) is widely expected to accelerate. Looking for only a modest upswing to 2.4% in 2017 and 2.6% in 2018, not a growth rate of 3.5% to 4.0%, as promised in his election campaign.
 M ost of the incremental growth in 2017 will come not from fiscal stimulus, tax cuts or infrastructure spending, but from the strengthening business cycle upswing which Mr. Trump has had the good fortune to inherit.
Following the 0.25% hike in the US federal funds range in December, expectation that the US Federal Reserve (Fed) will raise interest rates two or three times in the year ahead, taking the target range to 1.00% to 1.25% by year end 2017.
  • In the Euro-area, the outlook remains subdued in the short term, and still far from robust in the long term. Recently extended to December 2017, at a reduced rate of €60 billion per month from April 2017, the European Central Bank's (ECB) flawed quantitative easing (QE) strategy continues to fail to gain traction.
  • The continued Brexit fallout will slow Britain's real GDP growth, particularly foreign direct investment (FDI) in the UK. Meantime, the Bank of England's (BoE) credit promotion policies implemented in August risk adding domestically generated inflation to imported inflation from weak sterling.
  • In Japan the three-pronged program of Prime Minister Shinzo Abe has failed to reignite growth, while the Bank of Japan's (BoJ) quantitative and qualitative easing (QQE) program has failed to raise the underlying growth rate of broad money (M2).
  • A number of emerging market (EM) economies have increased their debt levels substantially over the past eight years, requiring domestic or external debt workouts and delaying the process of recovery.  It is also the case that recessions or growth weakness in the EM economies are unlikely to derail the modest-paced recovery in the developed economies. 
In spite of these short- to medium-term setbacks in the recovery process, thought is that the current global business cycle expansion will be an extended one. The main reason is that sub-par growth and low inflation would avoid the need for the kind of tightening policies that would bring an early end to the expansion.  In addition, although the recovery in the US is already seven and a half years old, it is only now starting to take on the typical characteristics of a normal recovery; banks have been providing credit instead of the Fed, and businesses and households are in good financial shape and can resume normal spending momentum.

Major Market Indices


Below is the Q4 '16 and overall 2016 price return performance of some of the major indices:


Index Q4 2016 2016
US Treasury 3 Month T-Bill
0.11% 0.34%
Barclay's US Aggregate Bond Index
Barclay's Municipal Bond Index
-4.64% -3.82%
S&P 500 Index
Dow Jones Industrial Average  7.94% 13.42%
MSCI EAFE (International Equities) -1.04%  -1.88%
MSCI Emerging Markets  -4.56%  8.58%
Russell Mid Cap 
 2.75% 11.76%
Russell 2000 Index (Small-Cap Stocks)
8.43% 19.48%
Bloomberg Commodity Index
2.55% 11.40%
Credit Suisse Long/Short Equity*
*this data is as of 11/30/16
1.88% -4.25%
Morningstar REIT Index -3.49% 2.90%

Quick Links

Our current investment topic: 

How To Understand Municipal Securities

Stay Connected
Some Memorable Financial Quotes 
Benjamin Franklin:
  • "A penny saved is a penny earned."
  • "Rather go to bed without dinner than to rise in debt."
  • "An investment in knowledge always pays the best interest."
Warren Buffett:
  • "Someone's sitting in the shade today because someone planted a tree a long time ago." 
  • "We've long felt that the only value of stock forecasters is to make fortune tellers look good. I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children."
  • "I will tell you the secret to getting rich on Wall Street. You try to be greedy when others are fearful. And you try to be fearful when others are greedy."
  • "Long ago, Ben Graham taught me that 'Price is what you pay; value is what you get.' Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down."
Ben Graham:
  • "The individual investor should act consistently as an investor and not as a speculator."
  • "The best way to measure your investing success is not by whether you're beating the market but by whether you've put in place a financial plan and a behavioral discipline that are likely to get you where you want to go."
  • "Successful investing is about managing risk, not avoiding it."
Robert Kiyosaki:
  • "It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for."
  • "You can't take care of charity unless you take care of yourself first."
Paul Samuelson:
  • "Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas."
  • "The stock market has predicted nine of the last five recessions."
Peter Lynch:
  • "You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets."
  • "If you go to Minnesota in January, you should know that it's gonna be cold. You don't panic when the thermometer falls below zero."
J. Paul Getty: "Buy when everyone else is selling and hold until everyone else is buying. That's not just a catchy slogan. It's the very essence of successful investing."
Robert G. Allen: "How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case."
Sir John Templeton: "The four most expensive words in the English language are, 'This time it's different.'"

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.

  • Wednesday, January 4: Federal Open Market Committee (FOMC) releases minutes of previous meeting at 2PM.
  • Thursday, January 12: Janet Yellen to give speech at 7:00PM.
  • Monday, January 16: Martin Luther King Jr. Day - Markets are closed. 
  • Friday, January 27 at 8:30AM: GDP, 4th quarter and annual 2016 (advance estimate). 
  • Tuesday January 31 - Wednesday, February 1: The Federal Open Market Committee (FOMC) meets, and releases their announcement on Wednesday at 2PM.
  • Monday, February 20: Presidents Day - Markets are closed. 
  • Friday, February 28 at 8:30AM: GDP, 4th quarter and annual 2016 (second estimate). 

  • Tuesday March 14 - Wednesday, March 15: The Federal Open Market Committee (FOMC) meets, and releases their announcement on Wednesday at 2PM. 
  • Wednesday, March 15 at 2:30PM: Fed Chair Janet Yellen to hold her quarterly press conference to explain the FOMC's latest quarterly economic projections. 
  • Thursday, March 30 at 8:30AM: GDP, 4th quarter and annual 2016 (third estimate); Corporate profits, 4th quarter and annual 2016. 

  • Wednesday, April 5: Federal Open Market Committee (FOMC) releases minutes of previous meeting at 2PM.

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

Direct office email: 

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