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Investment Newsletter - Q3 2016 

Welcome Summer! 

A brief overview of recent market activity and expectations follows below. Our current investment topic is: How to Understand Floating Rate Notes.  

The past quarter witnessed continued volatility, however it also showed some nice resiliency from the years difficult start. At this time of year, it is an opportune time to get outside and enjoy the warmer weather, and try to distract yourself from the day to day noise of the markets. Remind yourself that investing is for the long term, and despite the news headlines of today, that time and patience are your best friends in having investing success.   Also, we have some vacation tips (naturally, geared of the financial variety) below.  

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:
How to Understand Floating Rate Notes
For our investment topic, " How to Understand Floating Rate Notes", we focus on what Floating Rate Notes are, and how they are used in Fixed Income portfolios. 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:

The second quarter of 2016 saw a continuation of the rebound that started in March and showed that despite all of the gloom and doom warnings of December and January, that perhaps the economy was not in as bad shape as many had worried.  That being said, the quarter ended with a pretty large "cliffhanger" in the form of the Brexit vote, and Great Britain's ultimate decision to leave the European Union.  

As markets hate uncertainty, this caused the very predictable next round of market volatility which saw the market fall strongly after the vote for the next two days, only to rebound strongly the following several days to end the quarter.  Investing has always been about volatility, and the potential for big short terms swings both to the upside and downside.  The key will always be to take a breath, and realize that without being in the market, you would not have the potential for a larger upside than by placing funds in more conservative and less volatile alternatives.  

When we construct portfolios for our clients, we always start with an assessment of goals and risk tolerance, and try and educate on our approach.  We also utilize a very well diversified approach, with investments that have low correlations to each other, meaning that they should not all move in the same direction at the same time.  If the market volatility has you concerned or if you have any questions, please do not hesitate to let us know and we can discuss your individual situation in more detail.
Looking forward to the second half of 2016, we wanted to draw out some of the key points made by Morningstar (for the full report, feel free to *click here*):
  •  The S&P 500 has rallied since bottoming in mid-February and is back within a few percentage points of its all-time high. As a result, our analysts once again don't see much value in the market as a whole.
  • The fears that had gripped investors early in the year haven't exactly gone away: Economic growth is still sluggish to nonexistent around the world, corporate earnings are moving in the wrong direction, and valuations remain well above historic norms. However, investors appear to be coalescing around a worldview that's even gained its own endearing acronym: TINA, as in "there is no alternative" to stocks.
  •  Defying previous expectations for multiple Federal Reserve interest-rate increases this year, long-term Treasury yields have drifted lower since the beginning of 2016. At first, this was seen as reason for concern. If the Fed isn't in a position to raise rates now-seven years into the recovery and with unemployment at just 4.7%-then there must be something seriously wrong with our economy.  But TINA thinking is overtaking economic jitters. Sure, corporate earnings have been terrible.  And sure, the S&P 500 was recently trading for 21 times trailing 12-month operating earnings-a level not seen since the cyclically depressed earnings of 2009. But investors have to put their money somewhere. Even undervalued stocks are better than a 10-year Treasury yielding 1.5%, right?

Major Market Indices


Below is the Q2 '16 and Year-to-Date (YTD) price return performance of some of the major indices:


Index Q2 2016 YTD
US Treasury 3 Month T-Bill
0.07% 0.14%
Barclay's US Aggregate Bond Index
Barclay's Municipal Bond Index
1.57% 2.20%
S&P 500 Index
Dow Jones Industrial Average 1.38% 2.90%
MSCI EAFE (International Equities)  -2.64% -6.28%
MSCI Emerging Markets -0.32% 5.03%
Russell Mid Cap 
2.73% 4.52%
Russell 2000 Index (Small-Cap Stocks)
3.40% 1.41%
Bloomberg Commodity Index
12.71% 13.09%
Credit Suisse Long/Short Equity*
*this data is as of 5/31/16
-3.85% -3.20%
Morningstar REIT Index 4.50% 8.87%

Quick Links

Our current investment topic: 

How to Understand Floating Rate Notes

Stay Connected
Summer Sojourns or Soirees!

Summer traditionally represents the vacation travel season, which for many who work all year round, affords the opportunity to get away and recharge the batteries.  Many individuals save during the year, make detailed travel plans, and eagerly circle the dates on their calendars counting down the days to fun and sun!  From a financial planning perspective however, the danger is in the balance between some well-deserved time off vs. over indulgence and spending beyond the allocated budget.  Many people underestimate the true total costs of what that vacation may actually be, often just looking at the cost of travel and hotel.  Often overlooked is the cost of food and drink, travel upon arrival, and the entertainment once at the destination point.  Also overlooked is how was the trip paid for?
Some tips to consider to make it more financially favorable:  
  • Look for hotel alternatives such as Hostels; Vacation Rentals from Homeowners (sites such as VRBO, Airbnb, and even a place called Courchsurfing); Stay with friends and/or family. 
  • Be on the lookout for deals. If able to travel at the last minute, good deals can often be found (sites such as, travel alerts from websites like Bing Travel, and Airfarewatchdog. Simply plug in where you're from and where you want to go, and when a fare sale for that particular route surfaces, you get an email alert. Also ITA Matrix is a bare-bones site that has a good reputation for finding flights at low prices. If travelling in a group of 10 or more, inquire specifically about a group discount.
While it is very easy and convenient to put the costs on a credit card, is one factoring the interest payment on top of the purchase, and how much extra that compounding interest will add to the vacation once finally paid for?  Additionally, how much money did it cost to "prepare" for the trip, for items such as new clothing, pet watching expense, tune-ups for the car, to name a few. It is not uncommon for people to spend a lot of money in just preparing for the trip, vs. the actual cost incurred once on the trip.  All of these items must be factored in to the "total" travel budget.   Lastly, it is very easy for people once on vacation to overspend, psychologically telling themselves, "Hey, I am on vacation, let me buy it now and treat myself, and worry about how I will pay for it later".   From a financial planning view, travel and vacations are always a key discussion point and one that if properly planned for can lead to a rewarding and enjoyable experience, without having to result in financial pain to your long term savings plan.

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.
  • Tuesday July 26 - Wednesday, July 27: The Federal Open Market Committee (FOMC) meets, and releases their announcement on Wednesday at 2PM. 
  • Friday, July 29 at 8:30AM: GDP, 2nd quarter 2016 (advance estimate). 
  • Monday, September 7: Stock market closed in observance of Labor Day. 
  • Tuesday September 20 - Wednesday, September 21: The Federal Open Market Committee (FOMC) meets, and releases their announcement on Wednesday at 2PM. 
  • Wednesday, September 21 at 2:30PM: Fed Chair Janet Yellen to hold her quarterly press conference to explain the FOMC's latest quarterly economic projections. 

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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